VISION To be the expert in integrated water resources management in order to build up customers没 utmost satisfaction through its international quality standard while giving consideration to communities, society and environment under good corporate governance.
MISSIONS 1. To provide excellent and sufficient services in integrated water business in order to build up customers没 utmost satisfaction. 2. To be a learning organization and continuously develop our human resources. 3. To develop and manage water resources to increase their stability and sufficiency. 4. To increase competitiveness both in its core and related businesses. 5. To maximize benefits for stakeholders with integrity and transparency in order to create value added for the organization in the long run. 6. To develop the information technology (IT) to maintain the company没s competence. 7. To be an agency with corporate social responsibility and having concern for the communities and the environment. 8. To conduct a proper enterprise risk management in parallel with good corporate governance.
Highlights Table of Water Distribution Capacity and Water Consumption During 2000 - 2006 Unit : Million cubic meter / year
2000
2001
2002
2003
2004
2005
2006
Total Water Consumption
103.97
116.100
140.03
156.52
177.65
190.10
199.36
Capacity of Water Distributtion
263.00
263.000
328.00
328.00
328.00
328.00
328.00
2.53
2.277
2.34
2.10
1.85
1.73
1.65
Ratios of Water Distributionn Capacity and Water Consumption
Table of Financial Ratio Company
Book Value per Share Net Profit per Share Dividend per Share Net Profit to Total Revenue Return on Equity Return on Assets Debt to Equity Ratios
Eastern Water Resources Development and Management Plc.
2004 3.555 0.444 0.220 31.779 12.555 6.778 0.885
2005 3.16 0.39 0.25 35.40 12.41 6.99 0.88
Consolidated
2006 3.331 0.339 0.225 33.000 12.004 5.996 1.001
2006 3.33 0.39 0.25 21.50 11.92 5.48 1.20
R evenue
Structure by Business
Income Structure 2006-2005 CC-GRP Pipe 3%
Drinking Water 12% Tep Water 111%
Services + Otherrs 9% Raw Water 63%
Services + Others 21% CC-GRP Pippe 8%
Raw Water 56%
2005
Drinking Water 1% Tep Water 14%
2006
C Comparative ti TTotal t l RRevenue andd NNett PProfit fit (2006 - 2005) Million Baht 2500
2,400.93
2000 2,093.57
1500 1000 507.81
500.05
500
2006
2005 Total Revenue
Net Profit Annual Report 2006
Message from the Chairman In 2006 Eastern Water Resources Development and Management Public Company Limited or East Water continued to achieve an increase in sales of water, with the water consumption rising by 5 %. Despite the increased cost of raw water due to the rising energy costs and the costs of investments made during the critical period of drought in 2005, the company was still able to control its expenditures and raise its profits from 500 million baht in the previous year to 508 million baht. This year the water resource situation was less severe. The large amount of rainfall throughout the year resulted in the main reservoir filling to 90% capacity. This, together with a warning system used by the company to monitor the situation, led to confidence that the company would have sufficient water resources to meet current needs. In addition, the company is confident that it can cope with the anticipated increase in water demand from the implementation of the Petrochemical Project, Phase 3, in Rayong Province and urban development in support of the Suvarnabhumi International Airport. In order that its business operations adjust to the changing environment, the company has revised its vision and mission, resulting in a new Corporate Plan (2007 - 2009). The emphasis now is on specializing in the value of water and resolving problems efficiently and effectively to ensure the stability of the water distribution systems in our service area. The company has also initiated a Corporate Value program to be used as a guideline for business operations and to enhance our corporate image within society, with consideration also given to the environment, as well as to strive for the sustainable use of water resources. 6
Easterm Water Resources Development and Management Plc.
The efforts to overcome obstacles and to turn a crisis into an opportunity, coupled with proper business administration based on the concepts of risk management and good corporate governance, have yielded rewarding results. On 26 July 2006, the company was presented the award for the Best Corporate Governance Report 2006 by the Securities and Exchange Commission. Moreover, TRIS Rating Company granted a credit rating of çA+é to the company and its çstableé outlook reflects the companyûs strong position in terms of a high and increasing demand for water, as well as the low risks of its business operations. These positive results have brought great pride to the Management and the employees alike. For 2007, the company is determined to commit itself to the improvement and expansion of its water pipeline network to ensure its capacity for raw water distribution in the service area. It also aims to provide excellent services to our customers who will be the key to the companyûs growth and stability in the long run.
Sujarit Patchimnun (Chairman)
Annual Report 2006
7
Board of Directors
â—?
Mr. Sujarit Patchimnun* Age Position Education Work Experience Jan 02 - Present Apr 05 - Sep 06 Oct 02 - Mar 05
Mr.Utid Tamwatin
62 Chairman Master of Political Science, Thammasat University Chairman, Eastern Water Resources Development & Management PLC. Permanent Secretary Ministry of Interior Director-General Department of Provincial Administration
71 Director Master of Arts Oxford University, UK Director, Eastern Water Resources Development & Management PLC. Director Total Access Communication Co., Ltd. His Majesty's Deputy The Office of His Majesty's Principal Private Secretary
Age Position Education
8
Easterm Water Resources Development and Management Plc.
Vice Chairman, Eastern Water Resources Development & Management PLC. Deputy Permanent Secretary Ministry of Finance Director, Sukhumvit Asset Management Co., Ltd. Director-General, Excise Department
52 Director Docteur de 3 e Cycle (Droit Public General), (Mention tresbien) Universite de Paris X (Nanterre)
Work Experience Feb 99 - Present Director, Eastern Water Resources Development & Management PLC. Oct 01 - Present Director, Thai Airways International PLC. Sep 06 - Present The National Legislative Assembly Member May 01 - Present Chairman, Princess Maha Chaki Sirindhorn Anthoropology Centre Jan 03 - Present Director, Bank of Thailand Jan 03 - Present Director, Thai Asset Management Corporation Principal Private Secretary
Remark * Independent non-executive director Completed the Directors Certification Program by Thai Institute of Directors Association (IOD) â—?
Work Experience Jan 03 - Present Nov 06 - Present Dec 03 - Present Oct 04 - Oct 06
57 Vice Chairman Master of Law University of California, Berkeley, USA
Dr. Borwornsak Uwanno*
M.R.Tongnoi Tongyai Age Position Education Work Experience Feb 00 - Present 2000 - Nov 06 1976 - 2000
Age Position Education
Mr. Anucha Mokkavesa Age 56 Position Director Education Master of Public Administration (Personnal and Training) University of Southern California, USA Work Experience Jul 05 - Present Director, Eastern Water Resources Development & Management PLC. Oct 05 - Present Director, General Department of Disaster Prevention and Miligation May 05 - Present Director, the Provincial Waterworks Authority Oct 01 - Sep 05 Deputy Permanent Secretary Office of the Permanent Secretary Ministry of Interior
●
●
Mr. Uthai Juntima*
Dr. Prasert Chuaphanich Age Position Education Work Experience Jan 04 - Present Dec 04 - Aug 06 Dec 03 - Nov 04 Oct 02 - Nov 03 Jan 00 - Sep 02
60 Director Doctor of Philosophy, Civil Engineering, Oklahoma State University, USA
Age Position Education Work Experience Director, Eastern Water Resources Apr 05 - Present Development & Management PLC. Governor, the Provincial Waterworks Dec 04 - Present Authority Deputy Govenor, Area 1 and Acting Apr 05 - Present Governor the Provincial Waterworks Authority Jan 03 - Present Deputy Govenor, Area 1 the Provincial Waterworks Authority Deputy Govenor Corporate Affairs, the Provincial Waterworks Authority & Organization Development
●
Mr. Somchai Boonnamsiri* Age Position Education Work Experience Jan 03 - Present 1990 - Present Mar 03 - Present
52 Director Master of Economics The University of Manchester, UK Director, Eastern Water Resources Development & Management PLC. Chairman, Wall Street Tullett Prebon Co., Ltd. Director, Egcom Tara Co., Ltd.
Pol.Gen. Visut Kittivatana
58 Director M.P.A. (Public Policy) National Institute of Development Administration (NIDA)
Age Position Education Work Experience Director, Eastern Water Resources Jul 05 - Present Development & Management PLC. Governor Industrial Estate Authority Jul 05 - Present of Thailand Chairman Eastern Fluid Jul 05 - Present Transport Co., Ltd. Jun 05 - Present Director Global Utilities Services Co., Ltd.
●
Mr. Somnuk Kyavatanakij* Age Position Education Work Experience Jan 03 - Present 1994 - Present
45 Director Master of Science in Operation Research Florida Institute of Technology, USA Director, Eastern Water Resources Development & Management PLC. President and CEO, Tong Hua Communication PLC.
67 Director M.A. (Police Science and Administration) Washington State University, USA Director, Eastern Water Resources Development & Management PLC. Chairman, Global Water Systems Coporation Co., Ltd. Director, Universal Utilities Co., Ltd. President, The Royal Thai Police Association
●
Mr. Wanchai Lawatanatrakul Age Position Education Work Experience Feb 01 - Present 2001 - Present 2000 - Present 1998 - Present Jun 02 - Present
50 Director, President & CEO M.Eng. (Water Resources Engineering) Asian Institution of Technology President & CEO, Eastern Water Resources Development and Management PLC. Director, Universal Utilities Co.,Ltd Director, Egcom Tara Co., Ltd. Director, Global Water Systems Corporation Co., Ltd Director, Eastern Hobas Pipes Co., Ltd.
Annual Report 2006
9
Advisors to the Board of Directors Mr. Banphot Hongthong Age Position Education Work Experience Oct 03 - Present 2003 - Present Jun 03 - Present Sep 03 - Present Oct 03 - May 03 - Present Apr 04 - Present
Mr. Samart Chokkanapitark Age Position Education Work Experience Sep 04 - Present 2002 - Present 2001 - 2002
59 Advisor to the Board of Directors Master of Engineering (Civil) Lamar University, USA Advisor to The Board of Directors Eastern Water Resources Development & Management PLC. Director General Royal Irrigation Department Deputy Director General Royal Irrigation Department
Remark Completed the Directors Certification Program by Thai Institute of Directors Association (IOD) â—?
10
Easterm Water Resources Development and Management Plc.
59 Advisor to the Board of Directors M.A. (Economic Development) Northeastern University, USA Advisor to the Board of Directors Eastern Water Resources Development & Management PLC. Permanent Secretary Ministry of Agriculture and Cooperatives Chairman The Marketing Organization for Farmers Chairman Dairy Farming Promotion Organization for Farmers Present Vice Chairman Bang for Agriculture and Agricultural Co-operatives Director Agricultural Futures Trading Commission Director Assets Capitalization Bureau
â—?
Mr.Chairerk Disatha-amnarj Age Position Education Work Experience Feb 05 - Present Oct 06 - Present Jul 05 - Present Oct 03 - Sep 06
58 Advisor to the Board of Directors Master of Comparative Law University of Miami, USA Advisor to The Board of Directors Eastern Water Resources Development & Management PLC. Director General The Department of Lands Chairman Eastern Hobas Pipes Co., Ltd. Deputy Permanent Secretary Ministry of Interior
â—?
Pol.Lt.Gen.Dr. Wichianchot Sukchotrat Age Position Education Work Experience Jul 05 - Present Jul 05 - Present Mar 06 - Present Jan 06 - Present
59 Advisor to the Board of Directors Doctor of Philosophy (Criminology) Florida State University, USA Advisor to The Board of Directors Eastern Water Resources Development & Management PLC. Director Universal Utilities Co.,Ltd Director Krung Thai Bank PLC. Commissioner The National Committee on Civil Liberties and Justice
Mr. Chaiyasit Hotarakit Age Position Education Work Experience Oct 05 - Present Jul 04 - Sep 05
62 Advisor to the Board of Directors M.P.A, Brigham Young University USA Advisor to The Board of Directors Eastern Water Resources Development & Management PLC. Director General The Community Development Department
Mr. Vasan Peetipeerakul Age 54 Position Advisor to the Board of Directors Education Bachelor degree of Business Administration Taiwan University (Taipei daxue) Work Experience Jul 05 - Present Advisor to The Board of Directors Eastern Water Resources Development & Management PLC. Jul 05 - Present Director Universal Utilities Co.,Ltd 1997 - Present Director Committee of Phutthathum Insurance Co., Ltd. 1994 - Present Managing Director Namheng Stone Co., Ltd. 1993 - Present Managing Director Namheng Steel Co., Ltd. 1984 - Present Managing Director Namheng Concrete (1992) Co., Ltd. 1982 - Present Managing Director Namheng International Trading Co., Ltd.
M.L.Panasarn Hasdin Age 61 Position Advisor to the Board of Directors Education Master of Architecture University of Pennsylvania, USA Work Experience Mar 06 - Present Advisor to The Board of Directors Eastern Water Resources Development & Management PLC. 2006 - Present Director PTT Public Company Limited USA 2006 - Present Director Thai Red Cross Society 2005 - Present Director National Science Museum 2005 - Present Director Eastern Asia University
Annual Report 2006
11
Management Team
Mr. Wanchai Lawatanatrakul* Age Position Education Work Experience Feb 01 - Present 2001 - Present 2000 - Present 1998 - Present Jun 02 - Present
50 President & CEO M.Eng. (Water Resources Engineering) Asian Institution of Technology President & CEO, Eastern Water Resources Development and Management PLC. Director, Universal Utilities Co.,Ltd Director, Egcom Tara Co., Ltd. Director, Global Water Systems Corporation Co., Ltd Director, Eastern Hobas Pipes Co., Ltd.
Mr. Pairoj Sattayasansakul Age Position Education
Work Experience 2001 - Present Managing Director, Universal Utilities Co.,Ltd. Director, Chachoengsao Water Supply Co.,Ltd. Director, Bangpakong Water Supply Co.,Ltd. Director, Nakornsawan Water Supply Co.,Ltd. Nov 01 - Present Executive Vice President, Planning & Business Development Department, Eastern Water Resources Development and Management PLC.
Mrs. Namphon Rassadanukul* Age Position `
44 Senior Vice President (Internal Audit Department) Corporate Secretary MA, (Public Administration) Glasgow College of Technology, UK.
Work Experience Feb 04 - Present 2001 - 2004
Senior Vice President, Internal Audit Department Eastern Water Resources Development and Management PLC. Vice President, Internal Audit Department Eastern Water Resources Development and Management PLC.
Education
Remark * Completed the Directors Certification Program by Thai Institute of Directors Association (IOD)
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Easterm Water Resources Development and Management Plc.
47 Executive Vice President Planning & Business Development Department M.Eng. (Sanitary Engineering) Chulalongkorn University
Mrs. Thidarut Kraiprasit Age Position
Education Work Experience Oct 04 - Present 2001 - 2004 1997 - 2001
43 Senior Vice President (Finance and Human Resources Department) Acting Managing Director (Global Water Systems Corporation Co.,Ltd.) MBA, Kasetsart University CPA Senior Vice President Finance and Human Resources Department Eastern Water Resources Development and Management PLC. Vice President Finance and Human Resources Department Eastern Water Resources Development and Management PLC. Vice President Finance and Procurement Department Eastern Water Resources Development and Management PLC.
Mr. Cherdchai Pitiwacharakul Age Position Education Work Experience Nov 01 - Present 2000 - 2001
42 Vice President (Chachoengsao-Chonburi Operation Center) MS (Information Technology), King Mongkut's Institute of Technology Vice President Map Ta Pud Operations Center Eastern Water Resources Development and Management PLC. Manager Map Ta Pud Operations Center Eastern Water Resources Development and Management PLC.
Mr. Jaroensuk Worapansopak Age Position Education Work Experience Nov 02 - Present Nov 01 - Oct 02 Mar 01 - Oct 01
43 Vice President (Project Planning Department) M.Sc. (Hydraulic Engineering), International Institute for Hydraulic and Environmental Engineering (IHE), Delft, The Netherlands
Mr. Potjana Bunsiri Age Position
46 Vice President (Rayong Operation Center) MBA, Burapha University
Education Work Experience Nov 01 - Present Vice President Chachoengsao Operation Center Eastern Water Resources Development and Management PLC. Mar 01 - Oct 01 Manager, Large Scale Project Office Eastern Water Resources Development and Management PLC.
Mr. Namsak Wannavisute
Age Position Education Work Experience Vice President (Project Planning Nov 02 - Present Department) Eastern Water Resources Development and Management PLC. Nov 01 - Oct 02 Acting Vice President Project Planning Department Eastern Water Resources Development and Management PLC. Mar 01 - Oct 01 Project Planning Section Manager Eastern Water Resources Development and Management PLC.
41 Vice President (Business Development Department) Co-Managing Director (Eastern Hobas Pipe Company Limited) MS. (Finance), University of Colorado, USA
Ms. Fuangfa Nimcharoen Age Position Education Work Experience Nov 02 - Present Nov 01 - Oct 02 Mar. 01 - Oct 01
42 Vice President (Corporate Affairs Department) M. Sc (Resource Management) Kasetsart University Vice President Corporate Affairs Department Eastern Water Resources Development and Management PLC. Acting Vice President Corporate Affairs Department Eastern Water Resources Development and Management PLC. Assistant Vice President Administration Eastern Water Resources Development and Management PLC.
Mrs. Wirawan Tharanont
Age Position Education Work Experience 2005 - Present Vice President (Business Development Department) Eastern Water Resources 2004 - 2005 Development and Management PLC. Acting Vice President (Business Development Department) 2001 - 2003 Eastern Water Resources Development and Management PLC. Business Development Section Manager Eastern Water Resources Development and Management PLC.
47 Vice President (Office of the President and CEO) MBA, Graduate Institute of Business Administration of Chulalongkorn University Manager (Office of the President and CEO) Eastern Water Resources Development and Management PLC. Corporate Risk Manager Eastern Water Resources Development and Management PLC. Managing Director Global Water Systems Corporation Co., Ltd.
Annual Report 2006
13
Business Profile and Subsidiary Shareholding Structure Core Business Eastern Water Resources Development and Management Public Company Limited was founded by the Provincial Waterworks Authority (PWA) on October 15, 1992 to be responsible for the development and management of water pipeline systems in the Eastern Seaboard by supplying raw water for domestic consumption, industrial estates and factories in the area. Water is allocated from the reservoir of the Royal Irrigation Department to be distributed through the company没s main raw water pipelines. In 2006, the Company implemented its 2.3 billion Baht Bangpakong - Chonburi pipeline project to prevent raw water shortages and to respond to increasing demands for raw water. Moreover, it was entrusted by the Royal Irrigation Department to construct an approximately 1.7 billion Baht water pipeline system linking the Prasae Reservoir and the Khlong Yai Reservoir. More reserve raw water resources with the capacity of 7.4 million cubic meters in the Chachoengsao - Chonburi area have been acquired to ensure services stability. At the time of this reporting the company manages 307-km water pipelines with the combined pumping capacity of 423 million cubic meters per year.
Core Business Related Business
Related Businesses Tap Water Business : Universal Utilities Co., Ltd is a concessionaire offering tap water services in seven areas. In 2006 the company started the work under new contracts, i.e. Sattahip Waterworks (extension work to supply water to Pattaya Waterworks), Bangpakong Waterworks (extension work), Ko Lan Waterworks, Bo Win Waterworks and Rayong Waterworks (contract signed on March 14, 2006). In addition, it also produced tap water for Egcom Tara Co., Ltd. for Ratchaburi-Samut Songkram Waterworks and managed water leakage reduction systems for Service Area 2 of the Metropolitan Waterworks Authority. As of September 30, 2006, the company没s combined tap water production capacity was 106 million cubic meters per year, increasing by 13% when compared to 2005.
14
Eastern Water Resources Development and Management Plc.
Pipe & Equipment Business : East Water holds 50% shares in Eastern Hobas Pipe Co., Ltd. (EHP), which manufactures and supplies Centrifugally Cast Glassfiber Reinforced Polyester (CC-GRP) pipes, with the production plant located in the Eastern Seaboard Industrial Estate (Rayong Province). CC-GRP pipes can be used for transporting raw water and tap water, irrigation, wastewater treatment, drainage and heat removing systems in factories and industrial estates, conduits, etc.
Drinking Water Business : Global Water Systems Corporation Ltd. sells reversed-osmosis drinking water through automatic drinking water vending machines. Presently, there are over 4,000 units of drinking water vending machines nationwide.
Other Businesses: The company has set up an internal unit to operate the business of chemicals used in the tap water production and provide meter-reading, billing and collecting services to accommodate increased future investments.
Major Development in 2006 1. Core Business January 2006
April 2006
July 2006
The construction of the pipeline project connecting Prasae - Khlong Yai Reservoirs started under the jurisdiction of the Royal Irrigation Department in accordance with cabinet resolution of August 2, 2005. These 1,600 mm. and 1,400 mm. diameters pipes were laid covering a distance of 31.8 kilometers. The objective was to transmit water from Prasae Reservoir to Khlong Yai Reservoir, at approximately 80 million cubic meters per year. The 1,700 million Baht project is expected to be completed and begin pumping and distributing water in April 2007. At the time of this reporting, the construction of the tunnel to divert water from the Khlong Yai Reservoir to Nong Pla Lai Reservoir was completed. The raw water distribution pipeline project for Sri Racha Waterworks began. The pipeline, connected to the main Bangpakong - Chonburi pipeline, covers a distance of 3.85 kilometers. It can meet raw water demand of 6.57 million cubic meters per year. The project was completed and operations began in December 2006. The construction of a water pumping system to connect Kong Wa Canal Rayong, with the main Kong Plalai-Dokkrai - Map Ta Put pipeline began. The project valued at 12 million Baht. At the time of this reporting, the detailed design was completed and the operation is to begin in the third quarter of 2007. Annual Report 2006
15
August 2006
August 2006
The company purchased a plot of land near the Bangpakong - Chonburi pipeline with a water storage capacity of 7.4 million cubic meters. The 52 million Baht reserved water facilities will supply water to areas in Chachoengsao and Chonburi Province during the dry season and will be connected to the companyûs pipeline system that will begin operation in the fiscal year 2007. The construction of the Bangpakong - Chonburi pipeline diverting water of 50 million cubic meters per year from the Bangpakong River to the Chonburi area was completed. Testing was conducted in August 2006 and the system was ready to supply raw water in October 2006.
2. Related Business November 2005 Universal Utilities Co., Ltd., by Sattahip Waterworks, completed the project to increase production capacity and lay water pipes to Pattaya Waterworks in October 2005 to supply water to South Pattaya and Na Chom-Thian. The operation began in November 2005 and the facilities can meet the water consumption demand of the Muang Pattaya tourist industry at a minimum rate of 4.38 million cubic meters per year. December 2005 The extraordinary Shareholders Meeting of Eastern Hobas Pipe Company Limited No. 2/2005 held on December 6, 2005, passed a resolution to approve a capital increase of 100 million Baht, raising the capital from 150 million Baht to 250 million Baht. On the part of the company, loans from shareholders in the amount of 50 million Baht were converted to capital. January 2006 Universal Utilities Co., Ltd. increased its tap water production capacity for Nakhonsawan Waterworks by 1.25 times, making a total production capacity of 7 million cubic meters per year. This 46.50 million Baht project is expected to be completed in the second quarter of 2007. March 2006 Universal Utilities Co., Ltd. signed a contract with the Provincial Waterworks Authority which allowed a private company to produce and sell to the Provincial Waterworks Authority at the Rayong Waterworks for 25 years. The production capacity is 31.54 million cubic meters per year and the total project value was 600 million Baht. April 2006 Bangpakong Waterworks, an affiliated company of Universal Utilities made improvement to its water pumping system and increased its production capacity from 8.76 million cubic meters per year to 15.77 million cubic meters per year. Operation of this 21 million Baht project is anticipated to begin in April 2007.
3. Administration and Management November 2005 Thai Rating Information Services (TRIS) granted a+ credit rating to the Company and its çstableé debt outlook reflected the strong position of the raw water business in the Eastern Seaboard area. May 2006 The company made an announcement to increase raw water tariffs by 0.50 Baht per cubic meter to reflect increased energy costs. The new tariff structure, which applies to both new and existing customers, was effective as of September 1, 2006. July 2006 The company received the Best Corporate Governance Report Award in an event jointly organized by the Securities Exchange of Thailand and Finance and Banking Journal on July 26, 2006. The award was given to a listed company with an outstanding report in compliance with the 15 Good Corporate Governance rules set forth by the Securities Exchange of Thailand. September 2006 The company received ISO 14001 Environmental Management System Certification.
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Eastern Water Resources Development and Management Plc.
Industrial Situation and Competition The Thai economy during the first nine months of 2006 was affected by internal and external factors such as political instability and oil prices. The Bank of Thailand forecast an economic growth rate in 2006 of 4.5-5.0 percent and the inflation rate of 4.3-4.8 percent. However, in the fourth quarter the investment trend and the confidence in the business sector showed more positive signs as a result of the improved political situation following the administrative reform and the change of government. As for investment, the Bank of Thailand anticipated an increase in major industries, namely petrochemical, paper, automotive, automotive parts and electronics industries. When consideration was given to other indicators, such as the flow of direct foreign investments, the industrial production capacity utilization, and the approved investment promotion projects, all looked favorable. In 2006, the company developed its pipeline system on the Eastern Seaboard by allocating raw water resources to reinforce the water distribution stability through water resources networks. It was able to channel water from the Bangpakong River and Prasae Reservoir totaling 130 million cubic meters to supplement its current raw water resources at Dokkrai and Nong Plalai Reservoirs. The company没s reserved water resources, therefore, went up to 343 million cubic meters per year, capable of meeting the increasing demand of the industrial sector and for domestic consumption in the Eastern Seaboard area for the next 3-5 years.
Moreover, to further stabilize reserved water resources in the Eastern Seaboard area, the Royal Irrigation Department has a plan to link water sources in Chantaburi and Trad Provinces directly with the Prasae Reservoir, thus adding 50 million cubic meters per year and also developed Bangpakong-Bangpra Reservoir project for another 100 million cubic meters per year. Therefore the total reserved water will add up to 500 million cubic meters to accommodate long-term demand for water in the industrial sectors as well as for domestic consumption, which is likely to more than double in the foreseeable future. Annual Report 2006
17
Raw water business : The water crisis due to the drought that affected the Eastern Seaboard in 2005 required the company to invest 4,000 million Baht to resolve this problem. A network system involving the Bangpakong - Chonburi Pipeline Project and the Prasae-Khlong Yai Reservoir Network Project was implemented to link the water sources to the companyรปs pipeline network to increase efficiency and reassure customers of the companyรปs ability to supply raw water to meet increasing demand of the industrial sector. The company has also prepared a plan to cope with future droughts. The measures to be employed include: 1. A warning system, setting the minimum volume of reserved water and closely and consistently monitoring the water situation; 2. A reserved water resource system consisting of private and public water resources, canals and small reservoirs; 3. Provision of additional water resource networks; 4. Utilization of Demand Side Management In general, there was plenty of water in 2006. The total volume in five main reservoirs (Nong Pla Lai, Dokkrai, Khlong Yai, Prasae and Nong Kho) in the eastern region as of October 14, 2006 was 544 million cubic meters, or 99.87 of the combined capacity. This would enable the company to have sufficient reserve water in 2007. The completion of the companyรปs pipeline projects also ensured the stable water supply in the eastern region. The raw water demand of 199.36 million cubic meters represented a 5 percent increase while the raw water consumption ratio of the industrial sector compared to domestic consumption was 66:34, which was comparable to that of the previous year.
Combined Volume Percentage of Water Users by Type Industrial Sector 66%
Domestic Consumption 34%
2006
Waterworks business : Waterworks business in the private sector, especially the companyรปs business, continues to grow steadily as a result of the governmentรปs policy to encourage the private sector to play a role in the expansion of production capacity and waterworks distribution networks. Universal Utilities Co., Ltd., a wholly owned subsidiary of the company, has continuously expanded its waterworks business under new concessions, such as the Desalination Project on Samui Island, the Lan Island Waterworks Project,
18
Eastern Water Resources Development and Management Plc.
the Bo Win Waterworks Project, and the project to increase tap water production capacity at Sattahip Waterworks to supply water to Pattaya Waterworks. In 2006, the combined production capacity was 98.68 million cubic meters/year, an increase of 76 percent from 2005. The total water distribution volume was 39.45 million cubic meters/year, an increase of 26.5 percent from 2005. Due to the new contract with Rayong Waterworks the total number of water users was 96,971. Moreover, the company was able to expand the scope of its engineering service through the project to increase efficiency in tap water pipeline management by installing SCADA systems. Old distribution pipelines with long service life and leaking problems have been replaced in 19 projects. The new pipelines have resulted in cleaner water, improved water pressure, and reduction of water loss. The company plans to extend the coverage of this service throughout Southeast Asia.
Water vending machine business : As this service has gained increasing popularity among consumers, competition has become increasingly intense in Bangkok and suburban areas. Global Water Systems Corporation Ltd. (GWS) has been entrusted with the responsibility of producing public water vending machines to enable people to have easy access to good quality affordable drinking water. In 2006 GWS operated approximately 4,000 vending machines in various areas nationwide which generated revenue in amount of 19.04 million baht, close to year 2005, while the revenue from vending machine sales declined by 96.8 percent or 6.16 million baht.
Pipe and equipment business : Eastern Hobas Pipe Co., Ltd. is Thailand没s sole manufacturer and distributor of Centrifugally Cast Glassfiber Reinforced Polyester (CC-GRP) pipes. These are large plastic pipes with diameters of 300-1,800 mm used for distribution of raw, tap and waste water. Faced with the problem of the government没s investment budget, Eastern Hobas Pipe reported sales of 180 million Baht in 2006, a increase of 84 percent from 2005, which lower than target by 64 percent. Major competitors are those producing steel and HDPE pipes for raw and clean water systems, and concrete pipes used in waste water collection systems. Better performance of the pipe business is anticipated for 2007 because of the new government and the effort to submit an investment budget to the General Assembly in December 2006.
Pie chart showing percentage of customers by type
East water 58% Municipallities 16% PWA 26%
2006
Annual Report 2006
19
Risk Factors The management realizes the importance and the development of good corporate governance, which includes suitable risk management to mitigate the negative impact of circumstances that may impair the company没s ability to accomplish its objectives or goals. Thus, in 2006, the Risk Management Committee was established to formulate policies and monitor corporate risks. Action plans for risk management have been prepared by responsible agencies and work units to ensure consistent control of risks and report to the Board of Directors on a quarterly basis.
Key risk factors that may affect business operations include: 1. Investment in related businesses which deviate their goals Over the past five years, the company has expanded its operations from raw water to tap water, drinking water, and pipe & equipment businesses. While the tap water business has enjoyed steady growth, the performance of drinking water and pipe & equipment is still unsatisfactory. Due do intense competition in the market, and unclear of government policy on mega project. As a result, the Group suffered a net loss of 0.43 million Baht in 2006. However the company had closely monitored the performance of the Group and took steps to make adjustments to the administrative and financial structures in the drinking water and pipe & equipment businesses in 2006. It is expected that the subsidiaries companies will improve their performance next year.
2. Conflicts with communities concerning the use of water resources Most of the construction projects are major pipeline projects such as the Bangpakong-Bangphra-Chonburi Project and the Prasae-Khlong Yai Project. Their implementation and the use of water resources have caused conflicts with communities in the area. In view of this, in 2006 the company initiated an opinion survey of the communities and jointly organized public relations activities with the communities and their leaders. The company also supported public service activities, built storage tanks for rain water, and sent mobile water units to develop good relations with local communities. As a result, the problems and challenges arising from these two projects have been overcome, and the pipelines have been successfully implemented. 3. Inadequacy of water resources to meet water consumption demand At the beginning of the year, the company没s main water resources were still experiencing the impact of the 2005 drought. To mitigate this risk, the company has implemented a warning system to monitor the water situation on a daily basis, by setting the minimum water volume at five levels, with measures to be implemented for each level. Efforts have been made to reserve water resources and an additional piplines has been installed to add water to the company没s pumping system during the rainy season.
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Eastern Water Resources Development and Management Plc.
At the time of this reporting, the water volume in the main reservoirs was 285 million cubic meters, or at 95%. The completion of pipeline projects connecting various water resources has increased the security of the water supply system and enabled the company to have sufficient reserve water for the current and future demands. As a result, the risk of inadequacy water resources has been reduced to a minimal or zero level
4. Increased cost due to rising energy costs Pumping water from newly developed water resources and the rising cost of energy due to a higher Ft rate resulted in higher costs than anticipated. Although the company of course cannot control the cost of energy, which varied by the price of oil in the global market; it was able to manage by measures such as pumping water during the peak-off period and improving the pumps没 efficiency. The company has also prepared an energy conservation plan, explored alternative energy sources such as the sun and the wind, and conducted a study of the 2007 construction costs of its power plant. The company has now adjusted the water tariff for water consumption in 2007 to reflect increased energy costs.
5. Policies of the government and related agencies Uncertainty in the policies of government agencies can affect the company没s operations. For example, there is risk of a license not being granted or renewed for laying pipelines on the property of the Department of Highways or local jurisdictions. Still, the company has always been accorded full cooperation from the government agencies involved. Furthermore, the company没s business is in line with a cabinet resolution to promote industrial investment and tourism in the Eastern Seaboard. Although corporate risk is closely monitored by the Risk Management Committee, the company has set risk management action plans to be implemented by departments to maintain operational risks at an acceptable level. Risks are reviewed at the end of the year and also in the event of emergencies. The reviews are also used to identify business opportunities.
Annual Report 2006
21
Management Discussion and Analysis Eastern Water Resources Development and Management Pcl
1. 2006 Performance Report and Analysis In 2006, the Company and its subsidiaries recorded a total net profit 507.81 million baht, representing a 2 percent increase from 2005. Total revenue was 2,400.93 million Baht, an increase of 307.36 million Baht, or approximately 15 percent, from 2005. Revenue for each business is shown below. Revenue Structure in 2005 and 2006 Service and Others 24%
Tap Water 11%
CC GRP Pipe 9%
Drinking Water 12%
Raw Water 65%
Drinking Water 1% CC GRP Tipe 5% Raw Water 63% Tap Water 16%
Service and Others 9%
2006
2005
The revenue from raw water business was 1,356 million baht, rising by 38.34 million Baht or 3 percent and corresponding to an increase of 5 percent in raw water sales. Revenues from tap water business went up to 345 million baht, representing an increase of 105.90 million Baht or 44 percent as a result of sales to Ko Samui Waterworks and Pattaya Waterworks, a 21 percent increase in the number of new water users, and reduction of leakage in the areas served by Pathum Thani-Rangsit Waterworks and Om Noy Waterworks under the jurisdiction of Provincial Waterworks Authority and Service Area 2 of Metropolitan Waterworks Authority respectively. Revenue from sales of pipes was 180.08 million Baht, an increase of 82.45 million Baht or 84 percent from last year. The company没s total operating expenditures were 1,617.75 million Baht, increasing by 351.67 million Baht or 28 percent from 2005. This increase was due to the cost of sales that went up by 311.39 million Baht, corresponding with the increased revenues from the above mentioned businesses. The selling and administrative expenses increased by 16.12 million Baht or 8 percent due to marketing and advertising expenses. Interest expense, on the other hand, dropped by 49.76 million Baht or 35 percent because the company made investments in large projects and recorded the interest payable during the construction in the amount of 154 million Baht as assets in accordance with the accounting standards.
2. Financial Report and Analysis (as of September 30, 2006) In 2006 the company and its subsidiaries consolidated assets of 9,654.29 million Baht, representing an increase of 1,545.39 million Baht or 19 percent. Significant changes in assets included an increase of fixed assets following the investments of the company and its subsidiaries investments in water resource network projects and tap water business. The amount corresponded with a decrease in investment in government bonds as well as an increase in inventory and accounts receivable from its subsidiaries. Total debts were approximately 5,268.14 million Baht, representing an increase of 1,176.17 million Baht or 29 percent. These debts were primarily in the form of long-term loans from financial institutions in the amount of 1,656 million Baht to be used to increase the company没s investment in infrastructure and other projects. Shareholders没 equity amounted to 4,386.16 million Baht, a 369.24 million baht increase. This came mainly from the 2006 net profits of 507.81 million Baht and from payments made for ordinary shares in the amount of 24.89 million Baht. The total minor shareholders equity was 50 million Baht after the payment of dividends in the amount of 165.44 million Baht. As of September 30, 2006, the company and its subsidiaries reported cash and cash equivalents of approximately 271.52 million Baht, a decrease of 64.24 million Baht. The net amount received from business activities was 725.45 million Baht whereas the amounts spent on investment and fund raising were 2,366.24 million Baht and 1,576.55 million Baht respectively. 22
Eastern Water Resources Development and Management Plc.
Organizzation Structure
Board of Directors
Advisors to the Board of Directors
Nomination Committee
Audit Committee Remuneration Committee
Risk Management Committee Investment Committee
Corporate Governan Committee Internal Audit Department
sident & CEO
Corporate Secretary esearch an Center
of the President &
Public Rela
Executive Vice President Planning & Business Department
Project Planning Department
Business Development Department
Rayong Operation Center
Chaehoengsao Chonburi Operation Center
Finance and Human Resources Department
Coporate Affairs Department
Note : The Nomination Committee and the Remuneration Committee were merged in the fiscal year 2007. Annual Report 2006
Employees As of September 30, 2006 the company had 93 employees. Details are given below Office of the President and Executive Vice President
16
Internal Audit Department
5
Project Planning Department
7
Business Development Department
5
Rayong Operation Center
33
Chaehoengsao-Chonburi Operation Center
13
Finance and Human Resources Department
7
Corporate Affairs Department
7
Internal Information Control The Companyûs guideline concerning the use of internal information by the companyûs directors, management and employees are set in the Good Corporate Governance Policy and can be summarized as follows: 1. Directors, management, employees, supporting staff, and suppliersû employees shall accept legal and ethical obligations on confidentiality for the companyûs security. 2. The confidential trade information shall be well protected and not leaked to outsiders. Internal information shall be shared and used solely under the designated duties and responsibilities. 3. The release of information to outsiders shall require the approval of the companyûs President. If the information is related to joint-venture partners, their approval shall also be required. The functions responsible for disseminating the information to the public are the Public Relations Division, Office of the President; the Corporate Affairs Relations Division, Corporate Affairs Department; and the Investors Relations Division, Business Development Department. Corporate Relations officers are also in charge of disseminating news and information to employees. In addition, the company has informed the directors and management of their responsibility to report the acquisition and sales of the companyûs securities exceeding 5% of the total companyûs securities sold, in accordance with the format and procedure specified by the Securities and Exchange Commission. Securities holding of directors and management is also reported to the Board of Directors in every meeting.
24
Eastern Water Resources Development and Management Plc.
Good Corporate Governance Report from the Corporate Governance Committee The companyûs vision is to operate as an expert in integrated water management for the atmost satisfaction of the customers. The company aims to provide services of international standards with responsible consideration given to communities, society and the environment, under the concept of good corporate governance. The ultimate goal is to achieve the companyûs mission in creating maximum benefits for stakeholders with transparency and equity. To create added value for the organization in the long run, the company has enforced the Companyûs Principles of Good Corporate Governance and the Employees Code of Ethics, and has appointed the Corporate Governance Committee to supervise and develop the Principles of Good Corporate Governance to be effective in practice. Another responsibility of the committee is to evaluate and review the policies, principles, and important practices of the corporate governance process to be effective and suitable for the company, in conformity to the requirements of the Stock Exchange of Thailand. The important accomplishments in 2006 can be summarized as follows: ● Reviewed details of the 2006 Principles of Good Corporate Governance for Listed Companies distributed by SETûs Corporate Governance Center and made it a reference material to be used, together with the companyûs Articles of Association, in every Board meeting as guidelines for consideration of items on the agenda to ensure compliance with such principles. ● Defined additional practical guidelines in the 2006 Principles of Good Corporate Governance for Listed Companies on the issue of equal treatment for all shareholders. Procedures were defined to allow minority shareholders to propose additional matters to be included on the agenda and to nominate candidates for directorship. One way of doing this was to inform shareholders in advance via the companyûs website regarding the said procedures, giving the specific time frame and conditions. Their proposals were then collected and proposed to sub-committees for further consideration. ● Reviewed details of the draft Board of Directors Ethics before presenting it to the Board for consideration. From the 2006 survey on corporate governance of listed companies conducted by the Association for Promotion of Thai Corporate Directors, the company was ranked çvery goodé for its corporate governance. The company also received the Best Corporate Governance Report Award of the Securities Exchange of Thailand and Finance and Banking Journal for its report on compliance with the SETûs 15 Principles of Good Corporate Governance, thus reaffirming the companyûs commitment to continued development of the companyûs good corporate governance. Mr. Borwornsak Uwanno Chairman of the Corporate Governance Committee The Company believes that a good corporate governance process is a key element in achieving the companyûs goal, which is to add maximum value to its shareholders. The companyûs Principles of Good Corporate Governance have been developed with the objective of being used as guidelines for its personnel at all levels, from the companyûs directors to the Management, employees, associates, and contractorûs employees to ensure çtransparency, integrity, accountability and competitivenessé in its business operations.
1. Corporate Governance Policy The Board of Directors together with the Management defines the companyûs vision, missions and policies with consideration given to the business parameters and the Principles of Good Corporate Governance, to ensure the continued development of the companyûs excellent business practices. These Principles of Good Corporate Governance were last reviewed in March 2005 and judged to be appropriate and up to date. The companyûs personnel must understand these principles and consistently comply with the policies and codes of ethics under the Principles of Good Corporate Governance. Annual Report 2006
25
2. Shareholdersû Rights The 2005 Annual General Meeting of shareholders was held on 27 January 2006. Invitations to attend the meeting were sent no less than 14 days in advance, providing complete and clear details on the registration time, the schedule of the meeting, and the agenda of the meeting to help shareholders gain a thorough understanding of their rights and benefits, and to exercise appropriate judgments in voting. Moreover, the company has made a continued effort to offer more alternatives to shareholders by allowing independent directors to be their proxies in the event that shareholders cannot attend the meeting.
3. Stakeholdersû Rights The companyûs business philosophy emphasizes accountability and equal treatment among stakeholders. These include: ● Accountability towards shareholders, by giving consideration to investments that yield appropriate and fair returns and maintaining stable financial status for the purpose of viability and growth. ● Accountability towards clients, by managing and developing water resources and products and providing quality services that give clients maximum satisfaction. ● Accountability towards all employees by respecting their lawful rights, providing a good and safe working environment, and fair employment conditions that truly reflect the market situation, and by promoting the use of human resources to their full potential. ● Accountability towards business alliance with the company by developing relationships that will enable mutual maximum benefits with contractors, suppliers, and joint-venture, under the concept of good corporate governance. ● Accountability towards society and the environment, by carrying out business activities with social responsibility. The company respects and complies with relevant laws and regulations, to safeguard against any impact that will lead to loss of life or property of personnel, as well as the community and the environment.
4. Shareholderûs Meeting Seven members of the Board of Directors, including the Chairman of the Board, Chairman of the Audit Committee, and Chairman of the Nominating Committee, attended the 2005 Annual Shareholderûs Meeting. For each item on the agenda, the Chairman of the Board, who chaired the Meeting, allowed shareholders to exercise their rights to audit the companyûs business operations, make inquiries, express their views and offer suggestions. The results of the votes on each item on the agenda were reported to the shareholders informally before the Meeting was adjourned. In the minutes of the Shareholderûs Meeting, the resolutions passed were clearly recorded and the official results on the votes officially indicated, showing the votes for, against and abstentions for each item.
5. Leadership and Vision The Board of Directors plays a very important role in defining the companyûs vision, policies, and strategic plans, by setting a long-term corporate plan every three years. For operations each year, the companyûs Management proposes strategies and activities to the Investment Committee and the Board of Directors respectively for their consideration, comments and approval of operation plans, including the annual expenditure budget. In addition, Management reports on the progress of the annual operation plans and significant challenges during quarterly meetings of the Board of Directors as well as presenting for the Boardûs consideration investment projects with exceeding values of 20 million Baht to obtain approval.
6. Conflict of Interest Connected transactions between the company and its subsidiaries group or other interested parties will go through approval procedures that are proper and clearly spelled out, by using the same price structure and conditions as those applied to other trading partners of the company. Details on connected transactions are disclosed in the Annual Report and the Form 56-1. In addition, during monthly Board Meeting, the Board of Directors and the Management have required regular reports on the securities holding by members of the Board and the Management.
26
Eastern Water Resources Development and Management Plc.
7. Corporate Ethics In addition to the implementation of the çPrinciples of Good Corporate Governance of Eastern Water Resources Development and Management Publice Company Limited,é the company has also prepared the çBoard of Directors Manualé, which was declared effective on 17 August 2006, to be used by directors as the standard for compliance with the Principles of Good Corporate Governance. All the companyûs directors are required to sign an acceptance of the mentioned Manual. The Employees Business Ethics has also been made effective, and training on good corporate government has been provided for new employees. Projects to promote knowledge and understanding of good corporate governance have been organized for employees on a continual basis.
8. Balance of Power by Independent Directors In 2006, there were 11 members on the Board of directors comprising: 1 Executive director 4 Non-executive directors 6 Independent directors
9. Centralization and Decentralization of Power The Board of Directors focuses on transparency in business operations, decentralization of decision making, division of authority in reviewing and approving various matters. The Company Chairman is not the same person as the President & CEO and members of the Audit Committee do not have the power to sign any document that will legally bind the company, do not have monetary oversight in the finance and management of the Company or its affiliated companies.
10. Remunerations of Directors and Executives Remunerations of directors and the Management follow the principles and policies defined by the Board of Directors. The Remuneration Committee considers and proposes suitable remunerations to the Board of Directors for consideration and approval. In 2006, remunerations of directors and executives can be summarized as follows.
Directorûs Remunerations in 2006 First Name / Family name
Position
Meeting Attendance Fees
Remuneration
Bonus
Mr. Sujarit
Patchimnun
Chairman
154,000.00
489,000.00
575,000.00
Mr. Utid
Tamwatin
Vice Chairman
108,000.00
447,300.00
517,500.00
Mr. Borwornsak
Uwanno
Director
100,000.00
405,600.00
460,000.00
Mr. Anucha
Mokkavesa
Director
70,000.00
405,600.00
134,166.67
Mr. Prasert
Chuaphanich
Director
110,000.00
405,600.00
460,000.00
Mr. Uthai
Juntima
Director
110,000.00
405,600.00
191,666.67
Pol. Gen. Visut
Kittivatana
Director
187,312.50
724,600.00
134,166.67
M.R. Tongnoi
Tongyai
Director
110,000.00
405,600.00
460,000.00
Mr. Somnuk
Kyavatanakij
Director
110,000.00
405,600.00
460,000.00
Mr. Somchai
Boonnamsiri
Director
90,000.00
405,600.00
460,000.00
Executive Director and 4 executive members
6,028,769.00 Annual Report 2006
27
10.1 Directorsû Shareholding Mr. Sujarit Patchimnun, 1,088,000.00 shares; Mr. Somnuk Kyavatanakij, 204,100.00 shares; Executive Director and 4 executive members 1,822,700 shares. 10.2 Contributions to the Provident Fund In the fiscal year 2006, ending September 30, 2006, the company made contributions to the Provident Fund for Executive Director and 4 executive members the amount of 1,258,737 Baht..
11. Board of Directorsû Meeting The Board of Directorsû monthly meetings are scheduled during the third or fourth week of the month. The President and CEO, serving as the Secretary to the Board, sends an invitation together with the Meeting Agenda and relevant documents in advance to allow time for directors to review the information before attending the meeting. In the year 2006 eleven meetings were held and attended by members of the Board. Details on individual directorûs attendance are given below. Names of Members of Board of Directors Mr. Sujarit Patchimnun Mr. Utid Tamwatin M.R. Tongnoi Tongyai Dr. Borwornsak Uwanno Dr. Prasert Chuaphanich Mr. Uthai Juntima Mr. Anucha Mokkavesa Pol. Gen. Visut Kittivatana Mr. Somchai Boonnamsiri Mr. Somnuk Kyavatanakij Mr. Wanchai Lawatanatrakul
Position Chairman Vice Chairman Director Director Director Director Director Director Director Director Director and President & CEO
Meetings Attended/Meetings Held 11/11 9/11 11/11 10/11 11/11 11/11 7/11 11/11 9/11 11/11 11/11
12. Committees The Board of Directors has established committees comprising members with appropriate expertise to review and scrutinize the works assigned to them to initially ensure their accuracy, clarity and completeness before referring them to the Board of Directors for approval or ratification, whichever the case may be. Details on the committees established by the Board of Directors are listed below. 12.1 The Audit Committee is responsible mainly for considering and verifying the accuracy and credibility of the companyûs financial statement before submitting it to the Board of Directors; giving initial approval to the appointments of the external auditor and determining his/her remunerations; and reviewing and giving recommendations regarding evaluation of the effectiveness of the companyûs internal control systems, including compliance to relevant laws. In 2006, the regular quarterly meetings of the Audit Committee were held four times. Details on their attendance are summarized below. Audit Committee Dr. Borwornsak Uwanno Mr. Uthai Juntima Mr. Somchai Boonnamsiri Mrs. Leena Charensri
Position Chairman Member Member Advisor to the Audit Committee
Meetings Attended/Meetings Held 4/4 4/4 4/4 4/4
12.2 The Corporate Governance Committee has the duty to ensure that the company has complied with important elements of the corporate governance process that is effective and in line with the regulations of the Securities Exchange of Thailand. The Committee also makes sure that the Principles of Good Corporate Governance are being put into practice and that evaluations of compliance with the companyûs policies are conducted periodically. In 2006, the Committee held two meetings and details on membersû attendance are given below.
28
Eastern Water Resources Development and Management Plc.
Corporate Governance Committee Position Meetings Attended/Meetings Held Dr. Borwornsak Uwanno Chairman 2/2 Dr. Prasert Chuaphanich Member 1/2 Mr. Uthai Juntima Member 2/2 Pol. Gen. Visut Kittivatana Member 1/2 Pol.Lt.Gen.Dr.Wichianchol Sukchotrat. Ph.D. Member 2/2 12.3 The Investment Committee没s main responsibility is to set up policies and strategies for investment both in the core and related businesses; review the short-term and long-term investment plans; and scrutinize capital investments under the company没s work plan before presenting them to the Board of Directors. Details on meetings of the Investment Committee are given below. Investment Committee Position Meetings Attended/Meetings Held Mr. Utid Tamwatin Chairman 5/5 Mr. Somchai Boonnamsiri Member 4/5 Mr. Somnuk Kyavatanakij Member 5/5 Mr. Wanchai Lawatanatrakul Member and Secretary 5/5 12.4 The Risk Management Committee is responsible for overseeing and reviewing the risk management policy, standard practice, strategies, and overall risk assessment and providing recommendations to the Board of Directors to ensure that the risk management strategies are implemented appropriately. Details on its meetings are given below. Risk Management Committee Mr. Anucha Mokkavesa Mr. Somchai Boonnamsiri Mr. Chaiyasit Hotarakit Mr. Vasan Peetipeerakul Mr. Wanchai Lawatanatrakul
Position Chairman Member Member Member Member and Secretary
Meetings Attended/Meetings Held 2/2 2/2 2/2 2/2 2/2
12.5 The Nomination Committee consists of members appointed by the Board of Directors to find suitable persons to be considered for appointments as directors of the company and affiliated companies. In 2006, two meetings were held, details of which are given below. Nomination Committee Position Meeting Attended/Meeting Held Mr. Sujarit Patchimnun Chairman 2/2 Mr. Utid Tamwatin Member 1/2 Dr. Borwornsak Uwanno Member 2/2 Dr. Prasert Chuaphanich Member 2/2 Mr. Wanchai Lawatanatrakul Secretary 2/2 12.6 The Remuneration Committee has the main duty to formulate policies on remunerations and other benefits as well as guidelines for evaluation of performance of directors of the Company and its subsidiaries, including the President and CEO. The Committee also offers opinions on management structure and criteria for appointment of the company没s top level executives. In 2006, the committee held two meetings. Details on attendance of committee members are given below. Remuneration Committee Mr. Utid Tamwatin Mr. Somchai Boonnamsiri Mr. Somnuk Kyavatanakij Mr. Wanchai Lawatanatrakul
Position Chairman Member Member Secretary
Meetings Attended/Meetings Held 2/2 1/2 2/2 2/2 Annual Report 2006
29
The Board of Directors has regularly and continuously performed self-evaluation every year in order to review the accomplishments as well as problems and obstacles experienced over the year. The results are used for improvement of work efficiency, in accordance with the Principles of Good Corporate Governance. In 2006, the average score of all directors was 4.83 out of 5 points. The average scores in the descending orders were in the categories of financial reporting, Board Meetings, Directorsû Preparedness and Strategies, and Formulation and Planning respectively.
13. Internal Control and Audit Systems The company gives importance to internal control systems and emphasizes adequate and appropriate control that contributes to business efficiency in terms of finance, operations, risk management and corporate governance. Several work units have been assigned to follow up on the implementation of the Risk Management Project, evaluate the results, and prepare a report to be presentedr to the Risk Management Committee to regularly monitor the trends of risk factors. There are mechanisms to control the performance of the Management through the quality control system, ISO 9001:2000, and the Environment Management System, ISO 14001:2004 as well as a monitoring system to ensure the efficiency and effectiveness of the internal audit control system of the company and its subsidiaries. The company has conducted its Internal Audit Sufficiency Appraisal and is fully confident that its internal control systems are adequate and appropriate for its business, contribute to transparency in work execution, and enhance the effectiveness of sustainable business operations.
14. Board of Directorsû Report The Board of Directors is responsible for the preparation of the Consolidated Financial Statements of the Company and its subsidiaries in accordance with the Generally Accepted Accounting Principles in Thailand. In preparing the said financial statements the Board exercises its discretion with caution, makes the best projection and provides adequate disclosure in the Notes to Financial Statements. The Board of Directors has appointed the Audit Committee consisting of non-executive directors to be responsible for the quality of the financial statements and the internal audit systems. The Audit Committeeûs opinions appear in the Audit Committeeûs Report Section of this yearûs Annual Report. The Board of Directors holds an opinion that the companyûs internal control systems are adequate and appropriate for its business operations, capable of building reasonable confidence in the credibility of the companyûs and its subsidiariesû Consolidated Financial Statements as of 30 September 2006. The Board of Directorsû Report on its responsibilities toward the Financial Statements appears in this yearûs Annual Report. The Corporate Governance has verified the compliance with the good corporate governance process and has offered its opinions as shown in this yearûs Annual Report.
15. Relationship with Investors The company gives importance to disclosure of accurate, complete, and transparent information. In this light, information is disseminated through the channels of the SET and the Companyûs website. The Business Development Department has been given the responsibilities of communicating and providing information and news on various activities to institutional investors, shareholders, analysts, and the general publics.
16. Personnel Development Policy in 2006. The company realizes that its employees are highly valuable human capital and that they are a key factor to maximum efficiency and effectiveness in its business operations. In view of this the company has set a policy to enhance the competency of its staff of all levels, from employees to the top-level executives, on an ongoing basis, in terms of both general skills and specialized knowledge and technology required for the jobs. Work behaviors that contribute to core competencies have been encouraged in line with the companyûs vision and missions. The Human Resources Department is responsible for organizing training courses for employees competency development and for providing support for the departments under which those employees work to organize their own training programs for their staff. The ultimate goals are to equip them with skills required for their respective positions and to prepare them for professional growth in the future. 30
Eastern Water Resources Development and Management Plc.
Directors and Executives Nomination The Board of Directors of the company appoints representatives as Nomination Committee members to find suitable persons to be appointed as directors and President & CEO on a case by case basis. The Board of Directors has passed a resolution to grant the right to minority shareholders to nominate a person or persons to the Nomination and Remuneration Committee for preliminary review before submitting the list of nominee(s) to the Board of Directors for consideration. The Board proposes the candidates to be selected by the shareholders during the General Shareholdersû Meeting. According to the Companyûs Articles of Association, the Companyûs Board of Directors shall consist of at least 5 but not more than 11 directors elected by the Shareholdersû Meeting. The directors shall then elect among themselves the Chairman of the Board and may elect the Vice Chairman, the President & CEO, and other positions as they deem appropriate. No less than half of the Company directors shall be domiciled in the Kingdom of Thailand. Election and appointment of directors shall be carried out by the Shareholdersû Meeting in accordance with the following criteria and procedure. 1. Each shareholder shall have the number of votes equal to the number of shares held. 2. Each shareholder shall cast all of his/her eligible votes as stipulated in Item 1 to elect one or several persons as a director or directors but the votes may not be divided among candidates. 3. The candidates shall be elected in descending order of the votes received starting from the person receiving the highest votes until all the positions of directors are filled, or until the number of directors to be elected in that Meeting is fulfilled. In case of a tie vote that will result in the number of elected candidates exceeding the total number of directors or the number of the vacant positions to be filled in that Meeting, the Chairman shall have the deciding vote. 4. Independent directors shall have all the qualifications as defined by the Company in accordance with the regulations of the Office of the Securities and Exchange Commission (SEC). A shareholdersû meeting may pass a resolution to remove any director before the end of the term by a vote of no less than three fourths of all the shareholders eligible to vote who are present at the meeting, and the number of shares represented shall be no less than half of the number of shares held by the eligible shareholders present.
Connected Transactions The company and its subsidiaries have connected transactions with persons subject to conflict of interests (as of 30th September 2006), namely, water supply and services to major shareholders which are indicated in the note to financial statements. In addition, the other connected transaction is as follows:
The tap water production and waterworks system maintenance services for Egcom Tara Co., Ltd. (1) Details of Connection: The transaction is between Universal Utilities Co., Ltd. (UU) which is the companyûs subsidiary and Egcom Tara Co., Ltd. in which the company held 15% shares and Electricity Generating Public Company Limited (EGCOMP) held 70% shares. EGCOMP held 18.57% shares in the company as of 30 November 2006. (2) Type of Transaction: UU provided services to Egcom Tara Co., Ltd., namely, producing tap water, maintaining tap water production system and water distribution pipeline of Lak Muang tap water production plant and Pang Puay tap water production plant in Ratchaburi and Samut Songkhram by charging the service fees according to open bidding contract. (3) Value of Transaction: In 2006, UU received service fees from Egcom Tara Co., Ltd. totaling 26.25 million baht.
Trend or Policy on Future Connected Transactions As for future connected transactions, the company will process such transactions according to normal market conditions at fair price. The company will abide by laws on stock and stock exchange, regulations, announcement, orders or rules set forth by the Stock Exchange of Thailand, including the rules on information disclosure of connected transactions and acquisition or sale of the companyûs significant assets. Should there be the companyûs connected transaction with persons subject to conflict of interests or to stakeholders in the future, the company will disclose the information in the note to financial statements which are inspected by the companyûs auditor. Annual Report 2006
31
Development on Quality of Life and Environment in 2006 In 2006 East Water continually implemented various projects under its quality of life and environment development policy, focusing on improving the quality of life of people in communities. The company provided education and various skill development opportunities for young people, campaigning for water and environmental conservation and providing support for other community service activities organized by other private and public agencies within and outside its service areas. More than 9 million Baht financial assistance was provided in support of research and development projects of various organizations. Activities implemented in 2006 are summarized below. The çWater for Lifeé public service project continued to ensure sufficient clean water supply for consumption. The companyûs mobile units provided clean water to more than 150 locations in communities experiencing shortages of clean water and other agencies. A total of 24 units of 11.3 cubic-meter clean water containers were built for communities within the companyûs service area in Rayong, Chonburi and Chachoengsao Provinces. Up to the time of this reporting, the company had built altogether 177 units of these containers, with more than 35,000 households enjoying the benefits from this project. Over 50,000 bottles of drinking water were
provided to support public service activities organized by various communities and organizations, aiming to provide young people with clean and healthful drinking water. Water dispensing machines were presented to schools in the companyûs pipe laying areas such as Ban Tha Sao, Pai Bub Nai, and Wat Nong Kho schools in Rayong Provinces. The Water and Environmental Conservation Project continued with youths in the areas along the companyûs pipelines in Rayong, Chonburi and Chachoengsao Provinces, aiming to educate them and raise their awareness regarding water resources and environment conservation. The Water Conservation Youth Camp, the prototype of the çEast Water Environment Schoolé, was organized for more than 450 students from three areas. The Students Summer Training Camp offered opportunities to university students to appreciate the value of environmental conservation and learn about analytical thinking and practical skills while spending their summer vacation in a useful and meaningful way through social contributions. Moreover, under its Toxin-free Organic Agriculture Promotion and Development Program, the company, jointly with Offices of Provincial Agriculture in Rayong and Chonburi Provinces, organized a study tour on organic farming and the use of bio-organic substances instead of chemicals for 120 farmers in Rayong Province. Following this trip, these farmers applied what they learned to their farming activities and passed on their knowledge to over 600 other farmers in the nearby areas. There were also reforestation/afforestation activities for protection of water resources in the area, such as the planting of 1,500 Queenûs Crape Myrtle and Andaman Redwood saplings, covering area of approximately 93 rai, 32
Easterm Water Resources Development and Management Plc.
jointly with government agencies and community development volunteers in Rayong provinces; the reforestation project on the occasion of His Majesty the King没s Birthday and on the 60th Anniversary of His Majesty the King没s Accession to the Throne; and the Pracha Asa Reforestation Project at the Prasae Reservoir in honor of His Majesty the King. Other activities for promotion, rehabilitation and development of community water resources were jointly organized with the Nong Bua Tambon Administration Organization in Ban Khai District, Rayong Province, under the Project to remove weeds in the Rayong River (Yai Canal) covering a distance of 4 kilometers, and a similar program with Khlong-Khuan Sub-District in Chachoengsao Province to clean the Kon-Kaew Canal (in Tambon Kon-Kaew) and Ban Don Sam Canal (in Tambon Bang Rong), covering a distance of 8 kilometers. A number of social contribution projects were implemented in conjunction with other charity organizations. Financial support was given to the on-going research projects of the Local Museum Research and Development Fund of the Princess Maha Chakri Sirindhorn Anthropology Center and the scholarships for the ongoing program to encourage university graduates to return to their home provinces, under the Princess Maha Chakri Sirindhorn Foundation, provided educational opportunities for young people in need of financial support.
Donations were made for the construction of hospitals to commemorate HRH Crown Prince Maha Vajiralongkorn没s 50th Birthday Anniversary. The company also sponsored an event organized by the Ministry of Interior to promote and strengthen capacity building of people in line with the sufficiency economy policy. A budget was allocated to Chachoengsao Province to set up a garden in honor of His Majesty the King in the Royal Flora Expo. Support was also given to the Wave Protection Dam Project of the Foundation for Conservation and Rehabilitation of Corals and Beaches as a part of the activities to enhance natural resources and the environment. The Community Relations Project, aiming at providing support for public service activities jointly organized with various communities and local agencies, included the Songkran Festival organized with the Chachoengsao Municipality and the mangrove afforestation project around a chedi (pagoda) at the mouth of Rayong River together with the Rayong Municipality and Samut Chedi Community in Rayong Province. Moreover, support was given to the following activities: the bio-fertilizer project at Pluak Daeng and Ban Khai Districts in Rayong Province for farmers in the mixed agriculture project; a training program on irrigation work under the Phra Ong Chaiyanuchit O & M Project in Chachoengsao Province; provision of materials and equipment for village meetings and community landscape improvement activities; community soccer events, ongoing sports events to reinforce good its relationship with local government agencies; the 5th East Water-Si Sothon mini-marathon with the 2nd Army Engineering Corps, Chachoengsao Province; and soccer events to strengthen the company没s relationship with communities in its service areas. Annual Report 2006
33
2006 Internal Audit Sufficiency Appraisal Assessment of Adequacy of Internal Control Systems in 2006. The company gives importance to internal control systems and emphasizes adequate and appropriate controls that contribute to business efficiency in terms of finance, operations, risk management and corporate governance. The principles and the key substance of the assessment of adequacy of internal control systems can be viewed in five aspects. Organization and Environment The Board of Directors plays an important role in defining the corporate vision, policy and strategies by setting a long-term business plan, offering opinions, and approving activities and annual action plans. In addition the Board of Directors also applies the Key Performance Indicators and Balanced Score Cards to assess performance across the board in all functions of the organization, to ensure that performance monitoring and assessment are carried out fairly, efficiently, and systematically in line with the organizationรปs goals and objectives. The policy for internal management focuses on having a mechanism for checks and balances among the Board of Directors, the Management and shareholders. Information concerning the company is distributed and communicated to investors and the publics. Committees have been set up to review and make decisions on relevant matters. Members of these committees include one to three independent individuals or outsiders so that there will be a balance between committee members who may have personal interest in certain matters and independent or external members. In addition, the company has introduced the Principles of Good Corporate Governance of Eastern Water Resources Management and Development Public Company Limited, the Board of Directorsรป Ethics, and Employeeรปs Business Ethics, to be observed by its personnel at all levels, with emphasis on integrity and ethics in business operations. Risk Management During each fiscal year, risk assessments are conducted for various processes. To this end, employees are allowed to be involved in analysis of risk factors an control measures currently implemented and in determining additional control measures and transform them into risk management action plans. The goal is to increase the efficiency of the companyรปs internal control systems and to maintain risks at an acceptable level that corresponds with the changing environment and risk factors. Vice President, of the Office of the President & CEO, has been assigned to follow up on the implementation of the Risk Management Project, evaluate the results, and prepare a report to be presented to the Risk Management Committee which regularly monitors trends in risk factors. Control of the Managementรปs Performance The scope of authority and the amount of money authorized by the Management have been clearly defined to be consistent with the principles of good internal control regarding division of functions and verification of work among different functions. Functions involving the authority to approve accounting reports and information processing are separated from those involving assets maintenance. Having received the ISO 9001: 2000 Certification, the Work Procedures and Work Instructions Manuals have been developed and used as benchmarks for work performance. In the case of connected transactions of the company and its subsidiaries including companies and parties with shared interests, items are scrutinized and approved accurately, transparently and under the same 34
Eastern Water Resources Development and Management Plc.
conditions as those applied to other partners. Details on such transactions are presented in the Auditorรปs Notes to the Financial Statements. The company has continuously and regularly monitored the operations of its subsidiaries. The Business Development Department follows up on the progress of investments in various businesses and reports to the Board of Directors. In addition, it coordinates the policies to ensure that every company within the group is operating its business in a way that is consistent with the policies of the Board of Directors. The Corporate Secretary has been assigned to oversee the work of the Compliance Unit to ensure that the Companyรปs business activities comply with relevant laws, rules and regulations. The legal advisor of the Group is entrusted with the responsibility of reviewing business agreements before they are signed by authorized persons. Up to present, the Company has not performed any act that is in violation of the law. Information and Communication System The Company has provided adequate information to the Board of Directors for their decision making. The information is presented to the Board members in advance to allow adequate time for preliminary review. For every item on the agenda of every Board and committee meeting, background information and resolutions from previous meetings are provided to be used as references. Reports are made regarding the progress of action taken by the Management in accordance with comments from various committees. Such comments include the rationale, business sensitivity analysis, anticipated obstacles and impacts of such actions. Presentations of recommendations/suggestions include issues for consideration and/or options for discussion. In submitting the minutes of each meeting, the company informs individual directors/committee members that they can make amendments to the minutes within approximately five days after receiving the minutes. Monitoring System The Company has pursued the goals indicated in the long-term business plan and the annual action plans. Measures implemented include the Key Performance Indicators (KPIs), with the progress and result of the performance regularly reported to the meeting of the Board of Directors every quarter. The objective is to review matters and define guidelines for improvement and corrections of any inefficiencies brought about by changing situations. The emphasis is on taking timely corrective action. The Company gives great importance to internal audits and increases the value of the internal audits to the organization. Data on internal risk assessments have been used in risk-based audit planning and has conducted co-sourcing internal audit with the Internal Audit Department every year. This is to give the Board of Directors and the Management full confidence in the efficiency and effectiveness of the Companyรปs internal control systems and the accuracy and credibility of information, i.e., accounting/financial information and information used for business operations. In addition, other performance monitoring processes are implemented by means of the companyรปs internal quality and environmental monitoring systems in accordance with ISO 9001:2000 and ISO 14001:2004 and the companyรปs Information Technology systems Audit. Based on the Internal Audit Sufficiency Appraisal as mentioned above, the company is fully confident that its internal control systems are adequate and appropriate for its business, contribute to transparency in work execution, and enhance the effectiveness of sustainable business operations. Annual Report 2006
35
Reports of the other Sub-Committees Report of the Audit Committee for the Year 2006 In the 2006 fiscal year, the Audit Committee held four meetings with the management of the company and its subsidiaries, internal auditors and external auditors to discuss various issues to be presented to the Board of Directors. Inquiries were made and explanations were satisfactorily given. Details of the meetings and the Committeeûs recommendations are given below. 1. The interim financial statements and the 2006 financial statements have been reviewed and verified. Having inquired the company auditors and external auditors and having received explanations from management, the Audit Committee is of an opinion that the financial statements are valid and their material contents are in line with Thailandûs generally accepted accounting principles. In addition, all connected transactions have been duly disclosed with adequate details. 2. The risk-based internal audit plan for the fiscal year 2007 has been reviewed, verified and approved. Support has been given to the Internal Audit Department to achieve improved efficiency through capacity building and professionalism of the personnel, consistent internal control systems, and application of appropriate information technology systems. 3. The efficiency and the effectiveness of the companyûs internal control systems have been appraised, including their compliance with obligations to third parties and relevant requirements and laws by the company and its seven subsidiary companies. In this regard, the Audit Committee is of the opinion that internal control systems of the company and its subsidiaries are adequate and appropriate for their business operations. No significant issue has been found in terms of failure to comply with relevant obligations, requirements and laws. The Audit Committee has also monitored the development of several operational systems that will improve the Groupûs internal control. In the 2006 fiscal year, the Audit Committee resolved the following important matters. A) The company and its subsidiaries shall give importance to risk management and the management should review this issue on a quarterly basis. B) The company shall closely monitor its cash flow and consider contingency financial plans to provide for unpredictable investments C) The companyûs subsidiaries shall consider making improvements to increase efficiency in collecting payment from overdue debts and to formulate a policy to make appropriate provisions for allowance of bad debts and doubtful accounts. D) The company shall consider making improvements in the operations and capital restructuring of its subsidiaries to increase their efficiency and profitability. The Audit Committee places strong emphasis on improvement of the internal control systems by the management in order to always be efficient and appropriate to the business environment. 4. Promote and support the companyûs business operations to be consistent with the Principles of Good Corporate Governance of a Listed Company for 2006 under the Notification of the Securities Exchange of Thailand to ensure continued development of good corporate governance. The Audit Committee has reviewed the auditing fees and proposed to the Board of Directors that either Mrs. Saifon Inkaew, License No. 4434, or Ms. Rattana Jala, License No. 3734, or Mr. Narong Pantawong, License No. 3315 of Ernst & Young Office Limited be appointed as the company auditor for the fiscal year 2007. The proposal will be subsequently presented to the General Shareholdersû Meeting for approval.
(Mr. Bowornsak Uwanno) Chairman of the Audit Committee 36
Eastern Water Resources Development and Management Plc.
Report of the Board of Directorsรป Responsibility towerds the financial statements. The Board of Directors had a financial statement prepared to show the financial status and business performance of the company in 2006 in accordance with the Public Limited Company Act, B.E. 2535 (1992). The companyรปs Directors acknowledge that in their capacity as directors of a listed company in the Stock Exchange of Thailand, they have responsibility for the companyรปs financial statements and consolidated financial statements including the financial information appearing in the 2006 Annual Report. In this regard, the Board of Directors has appointed the Audit Committee consisting of independent, nonexecutive directors to be in charge of the quality of financial statements and verification of the effectiveness of the internal control systems of the company and its subsidiaries, to be reasonably confident that financial and accounting information is recorded accurately and completely. The financial statements also serve as guidelines for the company and its subsidiaries, providing them with information that can prevent dishonesty or significant irregularities. The Audit Committeeรปs opinions are presented in the Report of the Audit Committee in this Annual Report. In this light, the Board of Directors is of the opinion that the company has cautiously and rationally exercised its judgment and has used the best estimating method in preparing the financial statements, under the accounting policy that is appropriate, consistent, and in compliance with Thailandรปs generally accepted accounting standards. Important information has also been adequately disclosed in the Notes to Financial Statements.
(Sujarit Patchimnun) Chairman of the Board of Directors
(Wanchai Lawatanatrakul) President and CEO
Annual Report 2006
37
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
REPORT AND FINANCIAL STATEMENTS 30 SEPTEMBER 2006 AND 2005 Report of Independent Auditor To The Board of Directors and Shareholders of Eastern Water Resources Development and Management Public Company Limited I have audited the accompanying consolidated balance sheets of Eastern Water Resources Development and Management Public Company Limited and its subsidiaries as at 30 September 2006 and 2005, the related consolidated statements of earnings, changes in shareholders没 equity and cash flows for the years then ended, and the separate financial statements of Eastern Water Resources Development and Management Public Company Limited for the same periods. These financial statements are the responsibility of the Company没s management as to their correctness and completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the 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 audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eastern Water Resources Development and Management Public Company Limited and its subsidiaries and of Eastern Water Resources Development and Management Public Company Limited as at 30 September 2006 and 2005 and the results of their operations and cash flows for the years then ended in accordance with generally accepted accounting principles.
Saifon Inkaew Certified Public Accountant (Thailand) No. 4434
Ernst & Young Office Limited Bangkok : 29 November 2006
38
Eastern Water Resources Development and Management Plc.
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
BALANCE SHEETS AS AT 30 SEPTEMBER 2006 AND 2005 Note
CONSOLIDATED 2006 2005
ASSETS CURRENT ASSETS Cash and cash equivalents 271,524,131 Short-term investments 4 2,985,945 Trade accounts receivable 5 Related parties 6.2 154,066,399 Other companies - net 295,208,711 Total trade accounts receivable - net 449,275,110 Receivable from water loss reduction plan - related party 6.2 Bil ed 11,118,019 Unbil ed 14,060,558 Total receivable from water loss reduction plan - related party 25,178,577 Short-term loans to related parties 6.2 Other receivable - related parties 6.2 Inventories - net 7 124,647,754 Input tax refundable 21,615,527 Other current assets 54,814,810 TOTAL CURRENT ASSETS 950,041,854 NON-CURRENT ASSETS Restricted bank deposits 8 11,609,624 Investments accounted for under equity method 9 Long-term investments 4 95,387,500 Long-term loans to related parties 6.2 Property, plants and equipment - net 10.1 7,693,239,315 Assets under concession contracts - net 10.2 423,098,988 Deferred acquistion costs of concession - net 10.3 212,001,282 Goodwil - net 11 179,398,433 Other non-current assets Advance payment for pipeline installation 57,439,810 Others 32,075,078 Total other non-current assets 89,514,888 TOTAL NON-CURRENT ASSETS 8,704,250,030 TOTAL ASSETS 9,654,291,884
(Unit : Baht) THE COMPANY ONLY 2006 2005
335,761,872 719,810,703
205,416,207 2,837,628
204,643,384 719,664,771
136,874,793 214,511,612 351,386,405
90,766,868 54,484,178 145,251,046
81,768,771 39,763,333 121,532,104
5,475,887 8,535,405 14,011,292 149,335,155 67,610,922 79,481,044 1,717,397,393
113,350,000 180,000,000 10,956,456 6,995,363 9,295,614 53,738,285 39,724,101 61,130,107 526,831,052 1,347,704,014
28,936,370 9,156,000 10,356,000 676,048,802 614,953,473 276,112,031 95,387,500 276,112,031 362,890,000 330,890,000 5,296,304,254 7,038,697,133 4,745,511,510 220,113,801 184,349,960 187,768,130 177,537,961 57,439,810 177,537,961 20,380,846 6,922,616 8,213,042 197,918,807 64,362,426 185,751,003 6,391,503,353 8,246,541,861 6,163,574,017 8,108,900,746 8,773,372,913 7,511,278,031
The accompanying notes are an integral part of the financial statements. Annual Report 2006
39
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
BALANCE SHEETS (Continued) AS AT 30 SEPTEMBER 2006 AND 2005 Note LIABILITIES AND SHAREHOLDERS没 EQUITY CURRENT LIABILITIES Short - term loans from financial institutions Trade accounts payable Related parties Other companies Total trade accounts payable Short - term loan from related party Current portion of long - term loans from financial institutions Other current liabilities Payable from purchase of fixed assets Advance received Accrued interest Corporate income tax payable Others - related parties Others - other companies Total other current liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Excess of loss over costs of investments accounted for under equity method Long - term loans from related party Long - term loans from financial institutions - net of current portion Debentures Retentions payable Related party Other companies Total retentions payable TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES
CONSOLIDATED 2006 2005
12
60,000,000
50,000,000
-
-
6.2
6.2
735,332 243,863,693 244,599,025 5,000,000
1,860,000 149,543,588 151,403,588 -
10,216,187 7,453,895 17,670,082 -
6,307,595 7,520,181 13,827,776 -
13
165,000,000
32,500,000
100,000,000
-
191,921,365 34,863,721 36,645,383 108,948,736 22,596,955 117,416,624 512,392,784 986,991,809
717,837,148 85,582,547 27,132,644 106,454,259 48,572,703 107,676,949 1,093,256,250 1,327,159,838
118,310,156 34,890,534 98,437,214 15,418,510 76,624,017 343,680,431 461,350,513
670,089,229 26,966,220 89,438,193 125,952,938 70,579,081 983,025,661 996,853,437
9 6.2
100,000,000
-
11,525,822 -
-
13 14
1,656,000,000 2,500,000,000
237,000,000 1,425,000,000 2,500,000,000 2,500,000,000 2,500,000,000
6.2
25,143,393 25,143,393 4,281,143,393 5,268,135,202
2,684,116 7,928,350 27,818,958 11,307,058 9,784,468 27,818,958 13,991,174 17,712,818 2,764,818,958 3,950,516,996 2,517,712,818 4,091,978,796 4,411,867,509 3,514,566,255
6.2
The accompanying notes are an integral part of the financial statements.
40
Eastern Water Resources Development and Management Plc.
(Unit : Baht) THE COMPANY ONLY 2006 2005
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
BALANCE SHEETS (Continued) AS AT 30 SEPTEMBER 2006 AND 2005 Note SHAREHOLDERS没 EQUITY Share capital Registered 1,665,000,000 ordinary shares of Baht 1 each 15 Issued and paid up 1,323,503,380 ordinary shares of Baht 1 each (2005 : 1,299,687,000 ordinary shares of Baht 1 each) 15 Share subscription received in advance 15 Share premium Assets transferred from customers 17 Retained earnings Appropriated - statutory reserve 18 Unappropriated EQUITY ATTRIBUTABLE TO THE COMPANY没S SHAREHOLDERS MINORITY INTERESTS - EQUITY ATTRIBUTABLE TO MINORITY SHAREHOLDERS OF SUBSIDIARIES TOTAL SHAREHOLDERS没 EQUITY TOTAL LIABILITIES AND SHAREHOLDERS没 EQUITY
CONSOLIDATED 2006 2005
(Unit : Baht) THE COMPANY ONLY 2006 2005
1,665,000,000
1,665,000,000 1,665,000,000 1,665,000,000
1,323,503,380 590,780 1,123,429,772 53,043,276
1,299,687,000 1,323,503,380 1,299,687,000 590,780 1,122,346,832 1,123,429,772 1,122,346,832 56,514,928 53,043,276 56,514,928
166,500,000 1,694,438,196 4,361,505,404
152,408,912 166,500,000 152,408,912 1,365,754,104 1,694,438,196 1,365,754,104 3,996,711,776 4,361,505,404 3,996,711,776
24,651,278 4,386,156,682 9,654,291,884
20,210,174 4,016,921,950 4,361,505,404 3,996,711,776 8,108,900,746 8,773,372,913 7,511,278,031
The accompanying notes are an integral part of the financial statements.
(Mr. Sujarit Patchimnun) Chairman
(Mr. Wanchai Lawatanatrakul) President & CEO
Annual Report 2006
41
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
STATEMENTS OF EARNINGS FOR THE YEARS ENDED 30 SEPTEMBER 2006 AND 2005 Note REVENUES Sales - raw water 6 Sales - others Total sales Service income 6 Interest income and dividend income Share of profit from investments accounted for under equity method Other income TOTAL REVENUES EXPENSES Costs of sales - raw water Costs of sales - others Total costs of sales Costs of services Selling, servicing and administrative expenses Expense for development of life quality and environment Directors没 remuneration 20 Share of loss from investments accounted for under equity method Loss on sale of investments TOTAL EXPENSES EARNINGS BEFORE INTEREST EXPENSES AND INCOME TAX INTEREST EXPENSES INCOME TAX EARNINGS BEFORE MINORITY INTERESTS LOSS IN RESPECT OF MINORITY INTERESTS NET EARNINGS EARNINGS PER SHARE Basic earnings per share Net earnings Diluted earnings per share Net earnings
CONSOLIDATED 2006 2005 1,356,099,082 542,809,026 1,898,908,108 465,934,177 20,119,985
1,317,758,309 1,404,094,896 1,344,056,477 553,837,722 130,795,253 66,207,960 1,871,596,031 1,534,890,149 1,410,264,437 159,889,323 4,604,918 4,021,104 55,743,008 40,425,293 70,879,863
15,973,853 2,400,936,123
24,595,528 6,344,450 3,300,831 5,547,497 2,093,572,812 1,583,221,191 1,515,308,429
530,378,548 379,220,291 909,598,839 432,354,724 219,775,961
506,591,420 374,520,439 881,111,859 130,166,679 203,662,362
535,436,785 128,063,320 663,500,105 4,583,995 102,688,802
511,263,902 65,368,292 576,632,194 3,620,765 88,041,628
10,530,807 40,609,143
14,864,932 32,678,064
9,261,089 27,067,423
13,848,032 21,980,679
4,879,766 3,595,428 1,617,749,240 1,266,079,324 783,186,883 827,493,488 (93,189,074) (142,951,313) (227,342,894) (206,728,171) 462,654,915 477,814,004 45,154,015 22,236,619 507,808,930 500,050,623
430,493 4,879,766 812,411,673 770,809,518 (67,991,460) (195,009,128) 507,808,930 507,808,930
3,595,428 707,718,726 807,589,703 (127,029,107) (180,509,973) 500,050,623 500,050,623
23
0.39
0.39
0.39
0.39
23
0.37
0.39
0.37
0.39
The accompanying notes are an integral part of the financial statements.
42
Eastern Water Resources Development and Management Plc.
(Unit : Baht) THE COMPANY ONLY 2006 2005
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 30 SEPTEMBER 2006 AND 2005 CONSOLIDATED 2006 2005 Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to net cash provided by (paid from) operating activities Loss in respect of minority interests Shares of (profits) losses from investments accounted for under equity method Provision for diminution in value of inventories Allowance for doubtful accounts (reversal) Depreciation Amortisation of assets under concession contracts Amortisation of deferred acquisition costs of concession Amortisation of deferred debenture underwriting expenses Amortisation of assets transferred from customers Losses (gains) on disposal of fixed assets Amortisation of goodwil Earnings from operating activities before changes in operating assets and liabilities (Increase) decrease in operating assets Trade accounts receivable Receivable from water loss reduction plan Inventories Other current assets Other non-current assets Increase (decrease) in operating liabilities Trade accounts payable Accrued interest Corporate income tax payable Other payable Other current liabilities Retentions payable Net cash from operating activities
(Unit : Baht) THE COMPANY ONLY 2006 2005
507,808,930
500,050,623
507,808,930
500,050,623
(45,154,015)
(22,236,619)
-
-
6,088,868 3,814,288 228,646,954 11,578,657 8,556,896
1,140,529 (1,897,079) 201,511,047 9,956,003 3,111,112
430,493 163,567,694 -
(24,595,528) (1,897,079) 149,225,859 -
2,511,067 (3,471,652) (269,384) 8,369,697
1,341,856 (3,471,652) 56,668 8,437,516
2,511,067 (3,471,652) 199,323 -
1,341,856 (3,471,652) 2,481 -
728,480,306
698,000,004
671,045,855
620,656,560
(101,702,993) (11,167,285) 18,598,533 68,663,977 (12,989,921)
(159,252,210) 22,957,057 (62,192,493) 10,901,322 (3,489,385)
(23,718,942) 61,345,242 15,679
(2,583,984) (75,982,379) 1,408,147
93,195,436 9,512,739 2,494,476 (66,954,897) (2,675,565) 725,454,806
65,392,031 (1,103,482) 24,706,982 119,674,567 13,891,399 729,485,792
3,842,306 7,924,314 8,999,021 (110,534,428) 6,044,936 (3,721,644) 621,242,339
1,780,253 9,821,842 117,476,611 (11,535,824) 7,755,230 668,796,456
The accompanying notes are an integral part of the financial statements.
Annual Report 2006
43
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
STATEMENTS OF CASH FLOWS (Continued) FOR THE YEARS ENDED 30 SEPTEMBER 2006 AND 2005 CONSOLIDATED 2006 2005 Cash flows from investing activities Decrease in restricted bank deposits Decrease in short-term investments (Increase) decrease in short-term loans to subsidiaries Increase in long-term loans to subsidiaries Cash paid for investment in subsidiaries (Increase) decrease in advance payment for water pipeline installation Decrease in long-term investments Cash received on disposal of fixed assets Cash paid for purchase of fixed assets Net cash used in investing activities Cash flows from financing activities Cash received from (paid for repayment of) short-term loans from financial institutions Cash received from (paid for repayment of) short-term loans from related parties Cash received from (paid for repayment of) long-term loans from financial institutions Cash received from long-term loans from related party Cash received for capital increase from minority interest Cash paid for matured notes payable Cash received from capital increase Cash received from share subscription Dividends paid Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents as at beginning of the years Cash and cash equivalents as at ending of the years
17,326,746 706,824,758 -
1,200,000 26,935,133 706,827,143 1,098,051,114 66,650,000 (20,000,000) (32,000,000) (258,000,000) (50,000,000) -
120,098,151 (176,778,674) 120,098,151 190,724,531 698,451 190,724,531 2,958,051 405,634 2,205,385 (3,404,176,253) (1,070,519,662) (3,011,631,076) (2,366,244,016) (130,590,046) (2,005,925,866)
(176,778,674) 298,372 (798,915,445) (128,409,500)
10,000,000
(10,000,000)
-
-
5,000,000
(10,284,120)
-
-
1,551,500,000 100,000,000 50,000,000 24,899,320 590,780 (165,438,631) 1,576,551,469 (64,237,741) 335,761,872 271,524,131
(28,000,000) 1,525,000,000 (325,000,000) 444,144,000 24,899,320 590,780 (486,901,125) (165,033,750) (416,041,245) 1,385,456,350 182,854,501 772,823 152,907,371 204,643,384 335,761,872 205,416,207
(325,000,000) 444,144,000 (486,629,125) (367,485,125) 172,901,831 31,741,553 204,643,384
Supplemental cash flow information Cash paid during the years for :Interest expenses Corporate income tax
236,062,563 260,607,400
167,951,142 196,251,010
188,563,185 185,786,303
128,800,000 174,666,836
Non-cash related transaction :Payable for purchase of fixed assets Transfer short-term investments to long-term investments
191,921,365 10,000,000
717,837,148 -
118,310,156 10,000,000
670,089,229 -
The accompanying notes are an integral part of the financial statements.
44
17,554,247 1,098,049,958 -
(Unit : Baht) THE COMPANY ONLY 2006 2005
Eastern Water Resources Development and Management Plc.
Annual Report 2006
45
590,780 590,780
Share subscription received in advance
The accompanying notes are an integral part of the financial statements.
Balance - as at 30 September 2004 1,000,000,000 Amortisation of assets transferred from customers Increase in share capital 299,687,000 Increase in revaluation surplus on investments Transfered to statutory reserve Dividend paid (Note 19) Net earnings Balance - as at 30 September 2005 1,299,687,000 Amortisation of assets transferred from customers Increase in share capital 23,816,380 Share subscription received in advance Increase in share capital of subsidiaries Transfered to statutory reserve (Note 18) Dividend paid (Note 19) Net earnings Balance - as at 30 September 2006 1,323,503,380
Issued and paid up share capital
977,889,832 144,457,000 1,122,346,832 1,082,940 1,123,429,772
Share premium
Revaluation surplus (deficit) on investments
59,986,580 (15,294,037) (3,471,652) 15,294,037 56,514,928 (3,471,652) 53,043,276 -
Assets transferred from customers
CONSOLIDATED Minority interests
Total
(Unit : Baht)
127,292,613 1,377,448,905 42,718,793 3,570,042,686 (3,471,652) 444,144,000 15,294,037 25,116,299 (25,116,299) (486,629,125) (272,000) (486,901,125) 500,050,623 (22,236,619) 477,814,004 152,408,912 1,365,754,104 20,210,174 4,016,921,950 (3,471,652) 24,899,320 590,780 50,000,000 50,000,000 14,091,088 (14,091,088) (165,033,750) (404,881) (165,438,631) 507,808,930 (45,154,015) 462,654,915 166,500,000 1,694,438,196 24,651,278 4,386,156,682
Retained earnings Appropriated statutory reserve Unappropriated
FOR THE YEARS ENDED 30 SEPTEMBER 2006 AND 2005
STATEMENTS OF CHANGES IN SHAREHOLDERS没 EQUITY
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
46
Eastern Water Resources Development and Management Plc.
1,000,000,000 299,687,000 1,299,687,000 23,816,380 1,323,503,380
The accompanying notes are an integral part of the financial statements.
Balance - as at 30 September 2004 Amortisation of assets transferred form customers Increase in share capital Increase in revaluation surplus on investments Transfer to statutory reserve Dividend paid (Note 19) Net earnings Balance - as at 30 September 2005 Amortisation of assets transferred form customers Increase in share capital Share subscription received in advance Transfer to statutory reserve (Note 18) Dividend paid (Note 19) Net earnings Balance - as at 30 September 2006
Issued and paid up share capital Share premium
977,889,832 144,457,000 1,122,346,832 1,082,940 590,780 590,780 1,123,429,772
Share subscription received in advance
59,986,580 (3,471,652) 56,514,928 (3,471,652) 53,043,276
Assets transferred from customers
THE COMPANY ONLY
(15,294,037) 15,294,037 -
Revaluation surplus (deficit) on investments
127,292,613 25,116,299 152,408,912 14,091,088 166,500,000
1,377,448,905 (25,116,299) (486,629,125) 500,050,623 1,365,754,104 (14,091,088) (165,033,750) 507,808,930 1,694,438,196
Retained earnings Appropriated statutory reserve Unappropriated
FOR THE YEARS ENDED 30 SEPTEMBER 2006 AND 2005
STATEMENTS OF CHANGES IN SHAREHOLDERS没 EQUITY
EASTERN WATER RESOURCES DEVELOPMENT AND MANAGEMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
3,527,323,893 (3,471,652) 444,144,000 15,294,037 (486,629,125) 500,050,623 3,996,711,776 (3,471,652) 24,899,320 590,780 (165,033,750) 507,808,930 4,361,505,404
Total
(Unit : Baht)
NOTES TO FINANCIAL STATEMENTS 1. GENERAL INFORMATION Eastern Water Resources Development and Management Public Company Limited (矛the Company卯) is a Thai incorporated company listed on the Stock Exchange of Thailand. The major shareholder of the Company is the Provincial Waterworks Authority. The Company is engaging in the businesses of (a) development and management of the major water distribution pipeline systems in the eastern seaboard areas of Thailand and (b) procurement of raw water from government agency sources for commercial distribution to end users. According to the contract dated 26 December 1993 between the Company and the Ministry of Finance, the Company is privileged to manage the major water distribution pipeline systems in such areas for the period of 30 years. Whereby, the Company, in return, is required to provide the Ministry of Finance with the benefits specified in the agreement. The registered office of the Company is located at 9/9 Vipavadeerangsit Road, Laksi, Bangkok. 2. BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547. The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act B.E. 2543. The financial statements have been prepared on a historical cost basis except for those that have already been disclosed in the accounting policy. These consolidated financial statements include the financial statements for the years ended 30 September 2006 and 2005 of Eastern Water Resources Development and Management Public Company Limited and the following subsidiaries. Subsidiaries
Country of incorporation
Subsidiaries held directly by the Company Global Water Systems Corporation Limited
Thailand
Universal Utilities Company Limited
Thailand
Eastern Hobas Pipes Company Limited
Thailand
Type of business
Sale of water through vending machine and manufacture and installation of machines Production and supply of tap water, waste water treatment and sale of related tools, equipment and chemical products, and investment in three tap water supply companies Manufacture and sale of water distribution pipes
Percentage of shareholding 2006 2005
100
100
100
100
50
50
Subsidiaries held by Universal Utilities Company Limited Chachoengsao Water Supply Company Limited Thailand Bangpakong Water Supply Company Limited Thailand
Production and supply of tap water Production and supply of tap water
99 99
99 99
Nakornsawan Water Supply Company Limited Thailand
Production and supply of tap water
100
100
Material balances and transactions between the Company and its subsidiaries, investments in subsidiaries in the Company没s accounts, and the subsidiaries没 share capital have been eliminated from the consolidated financial statements. 3. SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies adopted by the Company and its subsidiaries are summarised below. 3.1 Revenue recognition a) Sales and service income Sales, which are the invoiced value, excluding value added tax, of goods supplied after deducting goods returns and discounts, are recognised as income when goods are delivered to customers. Service income, which is the value excluding value added tax, is recognised by reference to the stage of completion. Annual Report 2006
47
b) Income from water pipeline installation and the water loss reduction plan Income from water pipeline installation and the water loss reduction plan are recognised as income under the percentage of completion method. The expected loss on unprofitable contracts is recognised as soon as such loss can be foreseen. c) Interest and dividend income Interest is recognised as income on an accrual basis. Dividend income is recognised when rights to received dividend are established. 3.2 Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks with an original maturity of 3 months or less and free from restrictions. 3.3 Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is based on collection experience and the current status of receivables outstanding at the balance sheet dates. 3.4 Inventories The subsidiaries value their inventories at lower of cost and net realisable value. Inventory costs for each category and product type are determined as follows :Product types Inventory categories Finished goods Work in process Raw material and supplies
Water vending machines Specific identification method Specific identification method First-in, first-out method
Water distribution pipe Weighted average method Weighted average method
Provision for diminution in value of inventories is set up for obsolete, slow-moving or deteriorated inventories. 3.5 Investments Investments in subsidiaries are accounted for under the equity method. Goodwill, which is the excess of the cost of an acquisition over the attributable portion of the net asset value of the acquired subsidiary as at the date of acquisition, is amortised using the straight-line method over periods of from 2 to 27 years. The excess of losses over costs of investment in subsidiaries is presented as liability in the balance sheets. Investments in available-for-sale securities, both held as short-term and long-term investments, are determined at fair value. Changes in the value of securities are recorded as a separate item in the shareholders没 equity until the securities are sold, when the changes are then included in the statements of earnings. Investments in debt securities, both due within one year or expected to be held to maturity, are determined at amortised cost less allowance for impairment loss (if any). The premium/discount on debt securities is amortised using the straight-line method with the amortised amount included in determining earnings. Investments in non-marketable equity securities held as general investments are determined at costs less allowance for impairment loss (if any). Loss on impairment (if any) of investments is included in the statements of earnings. 3.6 Property, Plant and Equipment and Depreciation Land is stated at cost, plant and equipment are stated at cost less accumulated depreciation and allowance for impairment loss (if any). 48
Eastern Water Resources Development and Management Plc.
Depreciation of plant and equipment has been computed using the straight-line method over the estimated useful lives of the assets (except pipes in Chachoengsao which are depreciated by the units of production method). Estimated useful lives are as follows: Pumping plants Other buildings Land, leasehold and building improvements Machinery and equipment (Except pipes in Chachoengsao that are depreciated by the units of production method based on the capacity of assets over a 30-year period) Office equipment Vehicles No depreciation is provided for land and construction in progress. Depreciation is included in determining earnings.
33 years 20 years 5, 10, 20 years
5, 10, 20, 25 years 3, 5, 10 years 5 years
3.7 Assets under concession contracts and amortisation Assets under concession contracts are stated at cost less accumulated amortisation and allowance for impairment loss (if any). Amortisation of assets under concession contracts has been included in determining earnings and computed using the straight-line method over the concession period of 15 and 25 years. 3.8 Deferred acquisition costs of concession The subsidiaries没 acquisition costs of concession incurred directly in relation to obtaining the concession contracts from the Provincial Waterworks Authority and are amortised as expenses on a straight-line basis over the concession period of 27 and 30 years. 3.9 Capitalisation of borrowing as cost of assets Borrowing costs directly related to the acquisition of fixed assets are capitalised as part of the cost of the fixed assets, until the assets are ready for use. 3.10 Deferred debenture underwriting expenses The Company recorded debenture underwriting expenses arising from debenture issuance as assets awaiting amortisation. Deferred debenture underwriting expenses are amortised as expenses on a straight-line basis over the terms of the debentures, which are 4 and 7 years. 3.11 Goodwill and amortisation Goodwill presented as an asset in the consolidated financial statements is the excess of the cost of an acquisition over the fair value of the attributable portion of the net asset value of the acquired subsidiary as at the date of acquisition. Goodwill is stated at cost less accumulated amortisation and is amortised using the straight-line method over periods of from 2 to 27 years, as the concession period of subsidiary companies. The carrying amount of goodwill is reviewed annually and written down for impairment where it is considered necessary. 3.12 Impairment of assets The Company and its subsidiaries assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, the Company and its subsidiaries make an estimate of the asset没s recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the statements of earnings. Annual Report 2006
49
An asset没s recoverable amount is the higher of an asset没s net selling price and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 3.13 Operating lease Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognised as expenses on transaction date. 3.14 Employee benefits The Company, its subsidiaries and its employees have jointly established a provident fund. The fund is monthly contributed to by employees and by the Company and its subsidiaries. The contributions made by the Company and its subsidiaries are recognised as expenses when incurred. The Company issued to directors and employees the warrants to purchase the ordinary shares. Such transactions will be recorded in the financial statements when the warrants are exercised. 3.15 Foreign currencies Foreign currency transactions occurring during the years are translated into Baht at the rates ruling on the transaction dates. Assets and liabilities denominated in foreign currency outstanding on the balance sheet dates are translated into Baht at the rates ruling on the balance sheet dates. Exchange gains and losses are included in determining earnings. 3.16 Income tax The Company calculates income tax in accordance with the Royal Decree as empowered under the Revenue Code concerning state revenue rate reduction No. 387 B.E. 2544 dated 5 September 2001. The subsidiaries calculate income tax in accordance with the basis regulated in the Revenue Code. 3.17 Financial instruments The Company and its subsidiaries have no policy to speculate in or engage in the trading of any financial derivative instruments. Financial instruments carried in the balance sheets include cash and cash equivalents, investments, trade accounts receivable and payable, loans, borrowings and debentures. 3.18 Earnings per share Basic earnings per share is calculated by dividing net earnings for the years by the weighted average number of ordinary shares held by outside shareholders in issue during the years. Diluted earnings per share is calculated by dividing net earnings for the years by the sum of the weighted average number of ordinary shares held by outside shareholders in issue during the years and the weighted average number of ordinary shares which would need to be issued for conversion of all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the years or on the dates the potential ordinary shares were issued. 3.19 Use of accounting estimates Preparation of financial statements in conformity with generally accepted accounting principles requires the Company没s and its subsidiaries没 management to make estimates of certain accounting transactions, affecting amounts reported in the financial statements and notes thereto. Subsequent actual results may differ from these estimates. 50
Eastern Water Resources Development and Management Plc.
4. INVESTMENTS As at 30 September 2006 and 2005, the investments consisted of the following :Consolidated 30 September 2006 2005 Cost/ Cost Amortised cost Short-term investments Held-to-maturity debt securities - due within 1 year Deposits at financial institutions Promissory notes Held-to maturity debt securities - due within 1 year Total short-term investments
2,985,945 -
17,647,567 702,163,136
2,837,628 -
17,501,635 702,163,136
2,985,945 2,985,945
719,810,703 719,810,703
2,837,628 2,837,628
719,664,771 719,664,771
Consolidated 30 September 2006 2005 Cost/ Cost Amortised cost Long-term investments Held-to-maturity debt securities Government bonds Promissory notes Bills of exchange Held-to-maturity debt securities General investments Non-marketable equity securities General investments Total long-term investments
Total investments
(Unit : Baht) The Company Only 30 September 2006 2005 Cost/ Cost Amortised cost
(Unit : Baht) The Company Only 30 September 2006 2005 Cost/ Cost Amortised cost
10,000,000 10,000,000
133,344,450 57,380,081 190,724,531
10,000,000 10,000,000
133,344,450 57,380,081 190,724,531
85,387,500 85,387,500 95,387,500
85,387,500 85,387,500 276,112,031
85,387,500 85,387,500 95,387,500
85,387,500 85,387,500 276,112,031
98,373,445
995,922,734
98,225,128
995,776,802
4.1 date to be used in construction of water distribution pipeline network and new office building. As a result, the Company realized loss approximately Baht 4.9 million from such transaction and recognised in statements of earnings. 4.2 As at 30 September 2006 and 2005, the Company has long-term investment in equity securities of Egcom Tara Company Limited, a related company, which was stated at cost amounting to Baht 85.4 million and representing 15 percent of the paid-up share capital of that company. Egcom Tara Company Limited has been incorporated as a limited company in Thailand to engage in the business of supplying water produced in accordance with the Thai Industrial Standard to the Provincial Waterworks Authority of Thailand for distribution at Lak Muang Water Station in Ratchaburi Province, Damnoen Saduak Water Station in Ratchaburi Province and Samut Songkhram Water Station in Samut Songkhram Province. Annual Report 2006
51
5. TRADE ACCOUNTS RECEIVABLE The outstanding balances of trade accounts receivable as at 30 September 2006 and 2005 categorised by their aging, counting from due dates, are as follows: (Unit : Baht) The Company Only 30 September 2006 2005
Consolidated 30 September 2006 2005 Trade accounts receivable - related parties Not yet due Overdue Less than 3 months Total trade accounts receivable - related parties Trade accounts receivable - others Not yet due Overdue Less than 3 months 3 - 6 months 6 - 12 months Over 12 months Total trade accounts receivable - others Less : Allowance for doubtful accounts Total trade accounts receivable - others, net Trade accounts receivable - net
149,436,177
136,714,036
86,136,646
81,510,535
4,630,222 154,066,399
160,757 136,874,793
4,630,222 90,766,868
258,236 81,768,771
205,272,116
148,132,085
52,725,320
36,984,992
77,550,553 2,259,865 8,463,124 5,477,341 299,022,999 (3,814,288) 295,208,711 449,275,110
37,280,755 2,332,305 26,584,351 182,116 214,511,612 214,511,612 351,386,405
1,006,863 121,751 82,266 547,978 54,484,178 54,484,178 145,251,046
1,893,850 239,743 462,632 182,116 39,763,333 39,763,333 121,532,104
6. RELATED PARTY TRANSACTIONS 6.1 Transactions incurred during the years During the years, the Company had significant business transactions with its subsidiaries and related companies (related by way of having common shareholders and/or directors) mainly in respect of purchases and sales of goods, rendering and receiving services and inter-company loans. Such transactions are in the ordinary course of businesses. Related party transactions incurred during the years ended 30 September 2006 and 2005 and their respective pricing policies were summarised below. Consolidated For the years ended 30 September 2006 2005 Transactions with subsidiaries (Eliminated from the consolidated financial statements) Sales of raw water Purchases of goods
52
The Company Only For the years ended 30 September 2006 2005
-
-
47,996 65,414
26,298 217,751
Service income
-
-
156
238
Interest income
-
-
23,012
15,513
Eastern Water Resources Development and Management Plc.
(Unit : Thousand Baht) Pricing policy
Market price Market price and mutually agreed price as stipulated in the contracts Mutually agreed price as stipulated in the contracts As described in Note 6.4
Sales of chemicals Other income
Consolidated For the years ended 30 September 2006 2005 -
The Company Only For the years ended 30 September 2006 2005 452 1,636 1,631 2,072
(Unit : Thousand Baht) Pricing policy
Market price Mutually agreed price as stipulated in the contracts Mutually agreed price as stipulated in the contracts
Service expense (included in costs of sales - raw water and costs of sales - others)
-
130,895
71,425
Other expense (included in selling, servicing and administrative expenses)
-
383
112
896,012 101,512
894,503 -
896,012 -
Market price Mutually agreed price as stipulated in the contracts Mutually agreed price as stipulated in the contracts As described in Note 6.4
-
Transactions with related parties Major shareholders Sales of raw water 894,503 Service income 404,601 Related companies Service income
26,245
22,864
-
-
Interest expense
3,714
-
-
-
Market price
6.2 Outstanding balances at end of the years The outstanding balances of the above transactions as at 30 September 2006 and 2005, have been separately shown in the balance sheets, and consist of the following: Consolidated 2006 2005 Trade accounts receivable - related parties Major shareholders Provincial Waterworks Authority Industrial Estate Authority of Thailand Subsidiaries (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Chachoengsao Water Supply Company Limited Bangpakong Water Supply Company Limited Related company Egcom Tara Company Limited Total trade accounts receivable - related parties
101,477,629 49,392,579
3,196,191 154,066,399
(Unit : Baht) The Company Only 2006 2005
90,299,206 42,618,531
35,994,006 49,392,579
36,415,138 42,618,531
-
5,380,283 -
2,705,404 17,345 12,353
90,766,868
81,768,771
3,957,056 136,874,793
Annual Report 2006
53
Consolidated 2006 2005 Receivable from water loss reduction plan Major shareholder Provincial Waterworks Authority Short-term loans to related parties Subsidiaries (Eliminated from the consolidated financial statements) Global Water Systems Corporation Limited Eastern Hobas Pipes Company Limited Total short-term loans to related parties
25,178,577
14,011,292
-
-
-
-
113,350,000 113,350,000
130,000,000 50,000,000 180,000,000
Consolidated 2006 2005 Other receivable - related parties Subsidiaries (Eliminated from the consolidated financial statements) Eastern Hobas Pipes Company Limited Universal Utilities Company Limited Global Water Systems Corporation Limited Total other receivable - related parties Long-term loans to related parties Subsidiaries (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Eastern Hobas Pipes Company Limited Total long-term loans to related parties Trade accounts payable - related parties Major shareholder Provincial Waterworks Authority Subsidiary (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Total trade accounts payable - related parties Short-term loan from related party Related company Hobas Engineering GmbH Total short-term loan from related party
54
Eastern Water Resources Development and Management Plc.
(Unit : Baht) The Company Only 2006 2005
(Unit : Baht) The Company Only 2006 2005
-
-
10,307,294 644,968 4,194 10,956,456
6,409,989 491,100 94,274 6,995,363
-
-
262,890,000 100,000,000 362,890,000
230,890,000 100,000,000 330,890,000
735,332
1,860,000
-
-
735,332
1,860,000
10,216,187 10,216,187
6,307,595 6,307,595
5,000,000 5,000,000
-
-
-
(Unit : Baht) The Company Only 2006 2005
Consolidated 2006 2005 Other current liabilities - related parties Subsidiaries (Eliminated from the consolidated financial statements) Eastern Hobas Pipes Company Limited Universal Utilities Company Limited Global Water Systems Corporation Limited Related companies Hobas Engineering GmbH 15,353,579 Hobas Pipe Systems SRL 7,146,591 Hobas Rohre GmbH 96,785 Total other current liabilities - related parties 22,596,955
-
15,418,510 -
113,058,561 12,883,356 11,021
48,572,703 48,572,703
15,418,510
125,952,938
-
-
-
-
2,684,116 2,684,116
7,928,350 7,928,350
Long-term loan from related party Hobas Engineering GmbH Total long-term loan from related party
100,000,000 100,000,000
Non-current liabilities - retentions payable Subsidiary (Eliminated from the consolidated financial statements) Eastern Hobas Pipes Company Limited Total non-current liabilities - retentions payable
-
6.3 Movements of inter-company loans Movements of inter-company loans during the years were summarised below. (Unit : Baht) Consolidated Balance as at 30 September 2005
During the year Increase Decrease
Balance as at 30 September 2006
Short-term loans from related company Hobas Engineering GmbH
-
5,000,000
-
5,000,000
Long-term loans from related company Hobas Engineering GmbH
-
100,000,000
-
100,000,000
Annual Report 2006
55
(Unit : Baht) The Company Only Balance as at 30 September 2005 Short-term loans to subsidiaries Global Water Systems Corporation Limited Eastern Hobas Pipes Company Limited
Long-term loans to subsidiaries Universal Utilities Company Limited Eastern Hobas Pipes Company Limited
During the year Increase Decrease
Balance as at 30 September 2006
130,000,000
-
16,650,000
113,350,000
50,000,000 180,000,000
-
50,000,000 66,650,000
113,350,000
230,890,000 100,000,000 330,890,000
62,000,000 62,000,000
30,000,000 30,000,000
262,890,000 100,000,000 362,890,000
6.4 Details of related party loan agreements 6.4.1 Short - term loans to Global Water Systems Corporation Limited On 1 June 2004 and 4 November 2004, the Company granted loans to Global Water Systems Corporation Limited, a subsidiary, amounting to Baht 150 million and Baht 75 million, respectively as working capital for the project to produce 4,000 water vending machines for public community. The loans are unsecured and repayable within 12 months commencing from the first drawn-down according to the agreements. The Company charges interest to the subsidiary at the rate of 2.5% per annum for the first 12-month period (counting from the first drawn-down date) and thereafter at the minimum lending rate (MLR) per annum for the remainder of the agreements. On 7 April 2006, the Company has extended the repayment period and changed interest rate charged to be at the rate of 3.5% per annum for 6-month period commencing from 7 April 2006 and thereafter at the minimum lending rate (MLR) per annum. As at 30 September 2006, the Company had outstanding balance of loans to this subsidiary amounting to approximately Baht 113.4 million (30 September 2005: Baht 130 million). 6.4.2 Short-term and long-term loans to Eastern Hobas Pipes Company Limited On 13 December 2004, the Company entered into a loan agreement to provide loans to Eastern Hobas Pipes Company Limited, a subsidiary, with the loan limit of Baht 150 million as working capital in its operation and extension of its capacity. The loan is guaranteed by Hobas Engineering GmbH in a credit limit of Baht 75 million. The Company charges interest to the subsidiary at the fixed rate of 5.5% per annum. The repayment periods are separated into 2 parts as follow :-
First part Second part
Amount (Million Baht) 100 50
Loan period 6 years 1 year
Repayment period counting from the first drawn-down On a semi-annual installment basis Within 1 year
In addition, repayment of principal of the first part has a grace period of one year from the first drawn-down date. On 23 March 2006, the Company made an amendment to the loan agreement that the status of the loan provided to the subsidiary has been changed to a subordinated loan. As a result, the rights of the Company to receive repayment are therefore sub-ordinated to other secured creditors. 56
Eastern Water Resources Development and Management Plc.
As at 30 September 2006, the Company had outstanding balance of the loan provided to this subsidiary amounting to approximately Baht 100 million (30 September 2005: Baht 150 million). 6.4.3 Long-term loan to Universal Utilities Company Limited On 3 October 2002, the Company entered into a loan agreement with Universal Utilities Company Limited, its subsidiary, whereby the Company agreed to provide to the subsidiary a loan facility of Baht 300 million, of which the subsidiary is to make full or partial repayment at any time, but within ten years as from the agreement date. The loan bears interest at a fixed rate of 5.5 percent per annum for the first five years from the agreement date and at the minimum lending rate per annum thereafter, with such interest payable on a quarterly basis. In order to secure payments under this loan agreement, the Comapny arranged to have all of three subsidiaries of the subsidiary (i.e. Chachoengsao Water Supply Company Limited, Bangpakong Water Supply Company Limited and Nakornsawan Water Supply Company Limited) allowed the transfer to the Company of all collection rights under the concessions to produce water. As at 30 September 2006, the Company had outstanding long-term loan due from this subsidiary amounting to approximately Baht 262.9 million (30 September 2005 : Baht 230.9 million). 6.4.4 Loans from related company - Hobas Engineering GmbH Long-term loans On 9 February 2006, a subsidiary entered into a loan agreement to borrow Baht 100 million from Hobas Engineering GmbH, a related company for production capacity expansion purpose. The loan is subordinated and repayable within 31 December 2010 in six semi-annual installments commencing from the first drawn-down date with interest rate at the fixed rate of 5.5 percent per annum. As at 30 September 2006, the subsidiary had outstanding long-term loans from related party amounting to approximately Baht 100 million. Short-term loans On 14 June 2006, a subsidiary entered into another loan agreement to borrow Baht 5 million from Hobas Engineering GmbH for the materials procurement purpose. The loan is unsecured and repayable when the subsidiary receives payment from its customers. The loan carries interest at the fixed rate of 5.5 percent per annum. As at 30 September 2006, the subsidiary had outstanding balance of short-term loan from this related company amounting to approximately Baht 5 million. 7. INVENTORIES (Unit : Baht) Consolidated 30 September Finished goods Work in process Raw materials and supplies Goods in transit Total Less : Allowance for diminution in value of inventories Inventories - net
2006 96,019,701 18,843,108 18,664,342 133,527,151 (8,879,397) 124,647,754
2005 104,057,178 27,437,817 18,090,564 2,540,125 152,125,684 (2,790,529) 149,335,155
Annual Report 2006
57
8. RESTRICTED BANK DEPOSITS As at 30 September 2006, the Company and its subsidiaries have pledged fixed deposit accounts with banks amounting to Baht 11.6 million (The Company Only : Baht 9.2 million) to secure bank guarantees obtained from local commercial banks on behalf of the Company and its subsidiaries (30 September 2005 : the Company and its subsidiaries : Baht 28.9 million and the Company Only : Baht 10.4 million). 9. INVESTMENTS ACCOUNTED FOR UNDER EQUITY METHOD As at 30 September 2006 and 2005, the Company recorded the investments in subsidiaries under equity method. These represent investments in ordinary shares in the following subsidiaries :Paid-up share capital 30 September 2006 2005 Million Million Baht Baht
Name of subsidiary company
Global Water Systems Corporation Limited 74 Universal Utilities Company Limited 510 Eastern Hobas Pipes Company Limited 250 Total investments in subsidiaries
74 510 150
Equity interest 30 September 2006 2005 % % 100 100 50
100 100 50
The Company Only Investments Dividends Cost method Equity method For the years ended 30 September 30 September 30 September 2006 2005 2006 2005 2006 2005 Thousand Thousand Thousand Thousand Thousand Thousand Baht Baht Baht Baht Baht Baht 73,800 73,800 (11,526) 7,385 510,000 510,000 653,342 589,210 125,000 75,000 22,707 18,358 708,800 658,800 664,523 614,953
Presented as the following items in the balance sheets: Investments accounted for under equity method Excess of loss over cost of investments accounted for under equity method
-
-
676,049 614,953 (11,526) 664,523 614,953
As at 30 September 2006, the Company, as a parent company, recorded share of loss from its investment in Global Water Systems Corporation Limited in excess of cost of investment in that company and presented the excess under the caption of çExcess of loss over cost of investments accounted for under equity methodé as liabilities in the balance sheets. The meeting No. 8/2005 of the Board of Directors of Eastern Hobas Pipes Company Limited held on 4 October 2005 and the Extraordinary General Meeting of the shareholders of Eastern Hobas Pipes Company Limited held on 22 December 2005 approved a plan to increase its capital by Baht 100 million through issuing new ordinary shares to the existing shareholders. In order to maintain the Companyûs existing equity interest percentage in this company, the meeting No. 10/2005 of the Board of Directors of the Company held on 17 October 2005 passed a resolution approving an additional investment of Baht 50 million in Eastern Hobas Pipes Company Limited. 10. PROPERTY, PLANTS AND EQUIPMENT/ASSETS UNDER CONCESSION CONTRACTS 10.1 Property, plants and equipment (Unit : Baht) Consolidated
Land Cost : 30 September 2005 Purchase/transfer in Disposal/write off/transfer out 30 September 2006 Accumulated depreciation : 30 September 2005
58
Pumping plants
334,261,452 392,706,226 51,659,000 25,354,201 385,920,452 418,060,427 -
51,521,562
Eastern Water Resources Development and Management Plc.
Buildings
Land, leasehold and building Machinery and improvements equipment
Office equipment
205,677,771 26,247,085 231,924,856
36,690,251 3,623,655,999 157,673,827 21,097,360 494,773,397 35,440,967 (5,866,456) (2,495,459) 57,787,611 4,112,562,940 190,619,335
34,046,620
15,707,010
635,041,432
98,604,875
Vehicles
Construction in progress
Total
1,102,079 1,246,446 (1,678,191) 670,334
1,379,587,563 2,540,067,115 (567,794,245) 3,351,860,433
6,131,355,168 3,195,885,571 (577,834,351) 8,749,406,388
129,415
-
835,050,914
(Unit : Baht) Consolidated
Land -
Pumping plants 13,020,125
Depreciation for the year Accumulated depreciation on disposal /write off/transfer out 30 September 2006 64,541,687 Net book value : 30 September 2005 334,261,452 341,184,664 30 September 2006 385,920,452 353,518,740
Land, leasehold and building Machinery and Buildings improvements equipment 11,350,499 6,231,898 174,756,812
Office equipment 23,160,855
Vehicles 126,765
(5,027,974) (2,401,263) 804,770,270 119,364,467
(101,558) 154,622
45,397,119
21,938,908
171,631,151 186,527,737
20,983,241 2,988,614,567 35,848,703 3,307,792,670
59,068,952 71,254,868
Construction in progress -
Total 228,646,954 (7,530,795) 1,056,167,073
972,664 1,379,587,563 5,296,304,254 515,712 3,351,860,433 7,693,239,315
Depreciation included in statements of earnings for the years ended 30 September 2005 30 September 2006
201,511,047 228,646,954
(Unit : Baht)
Land Cost : 30 September 2005 Purchase/transfer in Disposal/write off/transfer out 30 September 2006 Accumulated depreciation : 30 September 2005 Depreciation for the year Accumulated depreciation on disposal /write off/transfer out 30 September 2006 Net book value : 30 September 2005 30 September 2006
Pumping plants
265,432,440 382,476,144 51,659,000 15,648,341 317,091,440 398,124,485
Buildings
The Company Only Land, leasehold and building Machinery and Office improvements equipment equipment
139,593,140 119,500 139,712,640
30,097,131 3,088,233,062 132,653,822 16,480,748 371,156,372 31,363,942 (2,287,328) (2,286,585) 46,577,879 3,457,102,106 161,731,179
Vehicles
Construction in progress
Total
1,068,978 1,141,596 (1,678,191) 532,383
1,409,066,313 2,383,374,692 (411,840,775) 3,380,600,230
5,448,621,030 2,870,944,191 (418,092,879) 7,901,472,342
-
51,256,233 11,644,846
27,680,046 6,979,689
14,411,308 5,416,584
523,028,461 121,372,902
86,637,156 18,042,019
96,316 111,654
-
703,109,520 163,567,694
-
62,901,079
34,659,735
19,827,892
(1,571,133) (2,229,314) 642,830,230 102,449,861
(101,558) 106,412
-
(3,902,005) 862,775,209
265,432,440 331,219,911 317,091,440 335,223,406
111,913,094 105,052,905
15,685,823 2,565,204,601 26,749,987 2,814,271,876
Depreciation included in statements of earnings for the years ended 30 September 2005 30 September 2006
46,016,666 59,281,318
972,662 1,409,066,313 4,745,511,510 425,971 3,380,600,230 7,038,697,133
149,225,859 163,567,694
As at 30 September 2006 and 2005, the Company and its subsidiaries have certain equipment and fixtures which was fully depreciated but are still in use. The original costs, before deducting accumulated depreciation, of those assets amounted to approximately Baht 144.6 million and Baht 122.1 million, respectively (The Company Only : Baht 111.4 million and Baht 97.4 million respectively). As at 30 September 2006 and 2005, a subsidiary company has its land, plants, machinery and equipment mortgaged/negatively pledged, with an aggregate net book value of Baht 196.4 million and Baht 187.5 million, respectively, to secure long-term loans as indicated in note 13 to the financial statements. For the years ended 30 September 2006 and 2005, the Company recorded borrowing costs related to the loans amounting to Baht 128.4 million and Baht 8.0 million, respectively, which were directly attributable to the construction of water pipeline distribution networks, as a part of çConstruction in progressé under the caption çProperty, plant and equipmenté. For the year ended 30 September 2006, a subsidiary company recorded borrowing costs amounting to Baht 2.9 million, which were directly attributable to the construction of asset under concession, as a part of çConstruction in progressé under caption çProperty, plant and equipmenté. Annual Report 2006
59
10.2 Assets under concession contracts (Unit : Baht) Assets under concession contracts Cost : 30 September 2005 193,201,918 Purchase/transfer in 11,452,384 Disposal/write off/transfer out 75,343,735 30 September 2006 279,998,037 Accumulated amortisation : 30 September 2005 25,398,028 Amortisation for the year 11,578,657 30 September 2006 36,976,685 Net book value : 30 September 2005 167,803,890 30 September 2006 243,021,352 Amortisation included in statements of earnings for the years ended 30 September 2005 30 September 2006
Consolidated Construction in progress
Total
52,309,911 203,111,460 (75,343,735) 180,077,636
245,511,829 214,563,844 460,075,673
-
25,398,028 11,578,657 36,976,685
52,309,911 180,077,636
220,113,801 423,098,988 9,956,003 11,578,657
The subsidiaries have committed to transfer assets under concession contracts to the Provincial Waterworks Authority at the end of concession periods. 10.3 Deferred acquisition costs of concession (Unit : Baht) Deferred acquisition costs of concession Cost : 30 September 2005 84,000,000 Purchase Disposal/transfer out 150,835,194 30 September 2006 234,835,194 Accumulated amortisation : 30 September 2005 14,277,016 Amortisation for the year 8,556,896 30 September 2006 22,833,912 Net book value : 30 September 2005 69,722,984 30 September 2006 212,001,282 Amortisation included in statements of earnings for the years ended 30 September 2005 30 September 2006
60
Eastern Water Resources Development and Management Plc.
Construction in progress
Total
114,626,976 36,208,218 (150,835,194) -
198,626,976 36,208,218 234,835,194
-
14,277,016 8,556,896 22,833,912
114,626,976 -
184,349,960 212,001,282 3,111,111 8,556,896
11. GOODWILL Changes in goodwill during the year can be summarised as follows: (Unit: Baht) Consolidated
Goodwill - cost Accumulated amortisation Net book value Remaining amortisation period
Balance as at 30 September 2005 201,205,413 (13,437,283) 187,768,130
Increase (8,369,697) (8,369,697)
Decrease -
Balance as at 30 September 2006 201,205,413 (21,806,980) 179,398,433
23 years
22 years
Amortisation of goodwill amounting to Baht 8.4 million is included in selling, servicing and administrative expenses in the statement of earnings. 12. SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS (Unit : Baht) Consolidated 30 September 2005
2006 Short-term loans Total
60,000,000 60,000,000
50,000,000 50,000,000
As at 30 September 2006 and 2005, short-term loans from financial institution of a subsidiary carry interests at the Minimum Overdraft Rates (MOR), which are 8.0 percent per annum and at the rate of 6.5 percent per annum, respectively. 13. LONG-TERM LOANS FROM FINANCIAL INSTITUTIONS Consolidated 30 September 2006 2005 Long-term loans from financial institutions Less : Current portion Long-term loans from financial institutions net of current portion
(Unit : Baht) The Company Only 30 September 2006 2005
1,821,000,000 (165,000,000)
269,500,000 (32,500,000)
1,525,000,000 (100,000,000)
-
1,656,000,000
237,000,000
1,425,000,000
-
Movements in the long-term loans from financial institutions during the year ended 30 September 2006 are summarised below. Balance as at 30 September 2005 Add: Additional borrowings Less: Repayment Balance as at 30 September 2006
Consolidated 269,500,000 1,567,000,000 (15,500,000) 1,821,000,000
(Unit : Baht) The Company Only 1,525,000,000 1,525,000,000
Annual Report 2006
61
13.1 Long-term loans of the Company On 9 November 2005, the Company entered into a credit facility agreement with a local financial institution for the credit limit of Baht 2,000 million which is detailed as follows:Credit facilit : Baht 2,000 million consisting of - Tranche A amounting to Baht 1,500 million - Tranche B amounting to Baht 500 million Type of loan : Unsecured, with status equivalent to unsecured and unsubordinated debts Period : 7 years Interest rate : - Tranche A, interest is payable on a monthly basis at the following rates Year 1-3 Fixed rate at 6.00% per annum Year 4-5 Minimum Loan Rate (MLR) minus 1.50% per annum Year 6-7 Minimum Loan Rate (MLR) minus 0.75% per annum - Tranche B, interest is payable on a monthly basis at the following rates Year 1-5 Minimum Loan Rate (MLR) minus 1.50% per annum Year 6-7 Minimum Loan Rate (MLR) minus 0.75% per annum Repayment Schedule : Principal is repayable in semi-annual installments, beginning after the grace period of 18 months from the date of the first draw down (17 November 2005), with installments to be allocated proportionally to Tranche A and Tranche B loans. As at 30 September 2006, the Company already drew down Baht 1,525 million, which comprised Tranche A loan amounting Baht 1,500 million and Tranche B loan amounting Baht 25 million. As at 30 September 2006, the Company had the ratio of net consolidated debt to consolidated EBITDA, which equaled 4.6 times. This is in excess of that stipulated in the conditions of a long-term loan agreement with a bank that required the Company to maintain such ratio not to be exceeding 4.5 times. The Company没s management believes that such excess will not be permanent and they would be able to maintain the ratio in compliance with the loan agreement. Therefore, the loans are still classified as non-current liabilities in the balance sheets. 13.2 Long-term loans of subsidiaries 13.2.1 Eastern Hobas Pipes Company Limited On 11 July 2002, Eastern Hobas Pipes Company Limited, a subsidiary, entered into a loan and other credit facilities agreement with a local financial institution for a credit limit of Baht 580 million. Amounts drawn down before 26 July 2002 carry interest at a fixed rate of 5.75% per annum for 3 years commencing from the agreement date, and thereafter at the Minimum Loan Rate (MLR) minus 0.5% per annum until maturity payable on a quarterly basis. Amounts drawn down after 26 July 2002 carry interest at the Minimum Loan Rate (MLR) minus 0.5% per annum payable on a monthly basis. The principal is to be repaid in 12 semi-annual installments of varying amounts, commencing from 11 July 2004. The loan and other credit facilities are guaranteed by the pledge of machinery and equipment and the mortgage of land of the subsidiary. On 24 July 2003, this subsidiary entered into another agreement with the same financial institution to obtain an additional loan and other credit facilities amounting to Baht 60 million. Amounts drawn down before 16 June 2003 carry interest at a fixed rate of 5.5% per annum for 5 years from the agreement date and thereafter at the Minimum Loan Rate (MLR) minus 0.5% per annum until maturity. The remaining facilities drawn down after 16 June 2003, carry interest at the Minimum Loan Rate (MLR) minus 0.5% per annum. Interest is payable on monthly basis. This loan is to be repaid in 10 semi-annual installments of varying amounts, commencing from July 2005. The loan and other credit facilities are guaranteed by the pledge of machinery of the subsidiary. As at 30 September 2006 and 2005, the subsidiary company had outstanding loans according to such agreements by approximately Baht 254.0 million and Baht 269.5 million, respectively. 62
Eastern Water Resources Development and Management Plc.
As at 30 September 2006, the subsidiary had the ratio of total debt to total shareholderûs equity in excess of that stipulated in the conditions of a long-term loan agreement with a bank. The subsidiary is negotiating with the bank and awaiting consideration from the bank. However, the management of the subsidiary believes that this matter might not have any impact to the subsidiary such that these loans will be call before maturity. Therefore, the loans are still classified as non-current liabilities in the balance sheets. 13.2.2 Universal Utilities Company Limited On 24 April 2006, Universal Utilities Company Limited, a subsidiary, entered into a credit facility agreement with a local financial institution for a credit limit of Baht 240 million. The loan carries interest at the Minimum Loan Rate (MLR) minus 1.5% per annum for the first forty eighth months, and thereafter at the Minimum Loan Rate (MLR) minus 0.75% per annum until maturity. Interest is payable on a monthly basis. The principal is to be repaid in 22 quarterly installments of Baht 10.9 million each, commencing the eighteenth month after the agreement date. 14. DEBENTURES On 16 July 2004, the Company issued two series of debentures, totalling Baht 2,500 million, the details of which are as follows: First series of debentures Second series of debentures Type of debenture : Registered, unsubordinated, unsecured with bondholder representative. Period : 4 years Number of units : 1,300,000 units Face value : 1,000 Baht per unit Total Amount : 1,300,000,000 Baht Maturity date : 16 July 2008 Interest rate : 4.6% per annum Payment date of : 16 January and 16 July of each year, interest commencing from 16 January 2005.
Registered, unsubordinated, unsecured with bondholder representative. 7 years 1,200,000 units 1,000 Baht per unit 1,200,000,000 Baht 16 July 2011 5.75% per annum 16 January and 16 July of each year, commencing from 16 January 2005.
The placement agreements for the debentures contain certain covenants pertaining to dividend payment, disposal or transfer of assets, maintenance of certain financial ratios and the percentage of shares held by the major shareholder. As at 30 September 2006, the Company had the ratio of net consolidated debt to consolidated EBITDA, which equaled 4.6 times. This is in excess of that stipulated in the conditions of a placement agreements of the debenture that required the Company to maintain such ratio not to be exceeding 4.5 times. The Companyûs management believes that such excess will not be permanent and they would be able to maintain the ratio in compliance with the placement agreement. Therefore, the debentures are still classified as non-current liabilities in the balance sheets. 15. SHARE CAPITAL The Extraordinary General Meeting of the Company’s shareholders No. 1/2548 held on 11 May 2005 passed a resolution approving the restructuring of the Companyûs capital as follows: 1. Approved a change in the par value of the Companyûs ordinary shares from Baht 10 to Baht 1 per share, and a change in the number, the exercise price and other relevant conditions of the warrants (EASTW-W1)
Annual Report 2006
63
offered to the shareholders and the warrants (EASTW-WA) offered to employees, directors and advisors to the Board of the Company, in line with the change in the par value of the ordinary shares, without negatively affecting the existing rights of the warrant holders. 2. Approved an amendment to Clause 4 of the Companyûs Articles of Association, in order to reflect the change in the par value of the Companyûs ordinary shares, as follows :Clause 4 registered capita : 1,665,000,000 Baht Divided into : 1,665,000,000 Shares Par value of shares Consisted of : 1 Baht Ordinary shares : 1,665,000,000 Shares Preference shares : None During the year 2006 the Company registered the increases in its issued and paid up share capital totaling Baht 23.8 million from shares offering and the exercise of warrants resulting in a premium on the issuance of these shares amounting to Baht 1.1 million. Therefore, as at 30 September 2006, the Company had the issued and paid-up capital of Baht 1,323.5 million. In September 2006, the Company received Baht 0.6 million from the warrant holders for the exercise of warrants and registered the increase in its share capital for those shares on 10 October 2006. 16. WARRANTS As at 30 September 2006, the outstanding balance of unexercised warrants after the change in the par value of the ordinary shares as discussed in Note 15 was as follows: 1. 50,000,000 warrants (EASTW-WA) issued to the Companyûs employees, directors and advisors to the Companyûs Board of Directors Type of warrant : Non-transferable Issue price : Allocation ratio : As determined by General Meeting of the Companyûs shareholders Term of warrant : 3 years Exercise date : Every 30th of December, March, June and September throughout the term of warrant Exercise price : Baht 1 per share Exercise ratio : 1 ordinary share/ 1 warrant First exercise date : 30 December 2004 Last exercise date : 2 December 2007 Outstanding unexercised warrants : 1,299,500 warrants 2. 340,000,000 warrants (EASTW-W1) issued to the Companyûs existing shareholders and general public Type of warrant : Non-transferable Issue price : Allocation ratio : As determined by General Meeting of the Companyûs shareholders Term of warrant : 3 years Exercise date : Every 30th of December, March, June and September throughout the term of warrant Exercise price : Baht 4 per share Exercise ratio : 1 ordinary share/ 1 warrant First exercise date : 30 December 2004 Last exercise date : 28 November 2007 Outstanding unexercised warrants : 339,630,850 warrants
64
Eastern Water Resources Development and Management Plc.
Movements in the number of warrants during the years were as follows: (Unit: Units)
EASTW-WA
Number of warrants as at 30 September 2004 Add: Warrants issued during the year Less: Exercised during the year Number of warrants as at 30 September 2005 Less: Exercised during the year Number of warrants as at 30 September 2006
50,000,000 (24,687,000) 25,313,000 (24,013,500) 1,299,500
EASTW-W1
Total
340,000,000 340,000,000 (369,150) 339,630,850
390,000,000 (24,687,000) 365,313,000 (24,382,650) 340,930,350
17. ASSETS TRANSFERRED FROM CUSTOMERS Assets transferred from customers represent water distribution pipeline systems and water measured equipment transferred to the Company by customers in accordance with the water supply agreement. Assets transferred from customers are presented at the amount net of the accumulated depreciation. 18. STATUTORY RESERVE Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside a statutory reserve at least 5 percent of its net earnings for the year after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution. As at 30 September 2006, the Company set aside the statutory reserve of Baht 14.1 million from its net earnings for the year 2006. 19. DIVIDEND On 28 January 2005, the Annual General Meeting of the Companyûs shareholders approved the payment to its shareholders a dividend of Baht 2.50 per share from its earnings for the year ended 30 September 2004, or a total of Baht 324.2 million for 129,680,000 ordinary shares. The Company paid the dividend on 28 February 2005. On 15 June 2005, a meeting of the Board of Directors passed a resolution approving an interim dividend payment to the Companyûs shareholders from the earnings for the six-month period ended 31 March 2005 of Baht 0.125 per share, or a total of Baht 162 million for 1,299,600,000 ordinary shares. The Company paid the dividend on 15 July 2005. On 27 January 2006, the Annual General Meeting of the Companyûs shareholders approved the payment of a dividend of Baht 0.125 per share to its shareholders from its earnings for the six-month period ended 30 September 2005 totalling Baht 165.0 million. The Company paid the dividend on 27 February 2006. 20. DIRECTORSû REMUNERATION Directorsû remuneration represents the benefits paid to the Companyûs directors in accordance with Section 90 of the Public Limited Companies Act, exclusive of salaries, bonus and related benefits payable to executive directors. During the first quarter of 2005, the Company issued 20,000,000 warrants to Companyûs directors as discussed in Note 16 to the financial statements. Such warrants can be exercised to subscribe to the ordinary shares of the Company at a price equal to the par value of Baht 1 each. 21. PROVIDENT FUND The Company and its subsidiaries, which are Universal Utilities Company Limited, Chachoengsao Water Supply Company Limited, Bangpakong Water Supply Company Limited and Eastern Hobas Pipes Company Limited, have established a provident fund in accordance with the Provident Fund Act B.E. 2530. The provident fund Annual Report 2006
65
plan was approved by the Office of the Securities and Exchange Commission. Under the plan, the employees are required to contribute to the fund at the rates of 3% to 10% of their basic salaries while the Company and its subsidiaries companies are required to contribute at the rates of 5% to 10% of the employees没 basic salaries. This provident fund is managed by an authorised fund manager in accordance with the terms and conditions prescribed in the Ministerial Regulation No. 2 (B.E. 2532) issued under the Provident Fund Act B.E. 2530. For the years ended 30 September 2006 and 2005, approximately Baht 5.6 million and Baht 4.8 million, respectively were contributed to the employee没s provident fund by the Company and its subsidiaries (The Company Only : Baht 3.5 million and Baht 3.3 million, respectively). 22.
NUMBER OF EMPLOYEES AND RELATED COSTS Consolidated 2006 2005 Number of employees at the end of year (Persons) 289 269 Employee costs for the years (Million Baht) 151.6 123.3
The Company Only 2006 2005 93 93 70.8 63.4
23. RECONCILIATION OF DILUTED EARNINGS PER SHARE For the years ended 30 September Weighted average number Net earnings of ordinary shares Earnings per share 2006 2005 2006 2005 2006 2005 Thousand Thousand Thousand Thousand Baht Baht Baht Baht shares shares Basic earnings per share Net earnings Effect of dilutive potential ordinary shares Warrants issued to employees, directors and advisors to the Company没s Board of Directors (EASTW-WA) Warrants issued to existing shareholders and general public (EASTW-W1) Diluted earnings per share Net earnings of ordinary shareholders assuming the conversion of dilutive potential ordinary shares
507,809 500,051
1,316,714 1,266,555
-
-
6,288
22,922
-
-
32,882
-
507,809 500,051 1,355,884
1,289,477
0.39
0.39
0.37
0.39
24. COMMITMENTS AND CONTINGENT LIABILITIES As at 30 September 2006, the Company and its subsidiaries had the following commitments and contingent liabilities. 24.1 The Company and its subsidiaries have had letters of guarantee totaling Baht 223.7 million (The Company Only : Baht 50.8 million) issued by banks to the Provincial Electricity Authority for electricity consumption, to the Ministry of Finance for management and operation of the major water distribution pipeline system in the Eastern Seaboard area, to the Industrial Estate of Thailand for the lease of land and for project bidding, and to counterparty for performance bonds. 24.2 The Company and its subsidiaries have commitments in respect of rental and service contracts with a period of 1 - 5 years, for which the future minimum charge according to the agreements until the end of the agreements of approximately Baht 43.6 million as payable by the Company and its subsidiaries (The Company Only : Baht 24.3 million). 24.3 The Company has a raw water purchase contract with the Royal Irrigation Department whereby it is 66
Eastern Water Resources Development and Management Plc.
to purchase water at the price specified in a Ministerial Regulation. 24.4 The Company and its subsidiaries have commitments of Baht 1,199.2 million (The Company Only : Baht 410.6 million) for projects under construction. 24.5 On 28 March 2003, the Company was sued as a defendant in a litigation case in connection with the purchase of assets from the Legal Execution Department. The plaintiff petitioned the civil court to void the sales transaction or order the payment of compensatory damages amounting to Baht 302.2 million to the plaintiff. On 26 January 2006, the Court of First Instance issued an order dismissing the lawsuit. However, the plaintiff lodged an appeal with the Court of Appeal on 22 March 2006. The Company has made its plea contesting the plaintiffûs appeal and the case is currently being heard by the Court. The Companyûs management believes that should the outcome of the case be finalised, there would be no significant loss to the Company. Therefore, the Company has not yet provided for any loss in the accounts. 25. SIGNIFICANT AGREEMENTS Beside the lending and borrowing agreements as discussed in relevant notes to financial statement, the Company and the subsidiaries have the following significant agreements. The Company 25.1 The Company entered into an agreement dated 26 December 1993 with the Ministry of Finance to manage and operate the major water distribution pipeline systems in the Eastern Seaboard area. The contract term is 30 years, from 1 January 1994 to 30 September 2023 and the Company is required to pay a minimum of Baht 2 million per annum to the Ministry of Finance. In any years when the Companyûs revenues from the sales of raw water exceed Baht 200 million, it is required to pay the Ministry of Finance with a sharing benefit at a rate of 1 percent of sales of raw water from the Nong Khor and Dok Krai reservoirs. In addition, when the Companyûs annual rate of return on equity exceeds 20 percent, an additional sharing benefit at the rate of 15 percent of the return in excess of the said 20 percent is to be paid to the Ministry of Finance. Nevertheless, the total sharing benefit is not to exceed 6 percent of the real value of the assets leased from the Ministry of Finance, as assessed according to the agreed time frame. 25.2 On 15 November 2000, the Company entered into an agreement with Universal Utilities Company Limited, a subsidiary, to receive waterworks management services for Sattahip Waterworks of the Provincial Waterworks Authority for the period of 10 years. The Company will pay the management fee from income after deducting license fee and related expenses as specified in the agreement. Moreover, the Company will receive the profit sharing from the subsidiary under the conditions specified in the agreement. Under the agreement, the subsidiary is to invest a total of Baht 16 million for the expansion of the water distribution area, a total of Baht 12 million for installation of centralized Supervisory Control and Data Acquisition (SCADA) and Geographic Information System (GIS) in order to improve the management system. Subsequently on 18 October 2004, the Company amended the above-mentioned agreement to extend the Pattaya Waterworks. Conse quently, the subsidiary is entitled to manage water system of Sattahip Waterworks for a period of 30 years from 1 March 2001 but not exceeding the period the Provincial Waterworks Authority has granted the Company the rights to operate and manage the Sattahip Waterworks System. 25.3 On 28 November 2000, the Company entered into an agreement with Universal Utilities Company Limited whereby it grants the subsidiary the rights to operate the waterworks of the Municipality of Si Chang Island Sub-district for a period of 15 years. The subsidiary is to pay in return to both the Municipality of Si Chang Island Sub-district and the Company at the rates as specified in the agreement. 25.4 On 11 May 2004, the Company entered into a waterworks management agreement with Universal Utilities Company Limited (the subsidiary) whereby the subsidiary is to provide water works management services in Bo Win Municipal area for a period of 25 years from the date the subsidiary completed the construction works of tap water production system and the Company agreed for commercial distribution of tap water (11 March 2005). Under the agreement, the subsidiary is to procure land and construct tap water production system sufficient to supply tap water throughout the agreement period. The subsidiary is to transfer all the invested assets to the Company and/or the Municipality on the earlier expiry date of the waterworks operation agreement or the waterworks management agreement. The Company is to pay an annual waterworks management fee at the rates specified in the agreement, determined on the monthly tap water sales and service fees, which can be collected from the users. Since later on 5 August 2005, the Company entered into a waterworks system operation and management agreement with the Bo Win Sub-district Administration Organization (çSAOé), it therefore revised the Annual Report 2006
67
aforementioned agreement with the subsidiary to cover Bo Win SAO area. As a result the aforementioned agreement was superseded and the new agreement dated 14 July 2006, having the same conditions with an additional area of Bo Win SAO, is replaced. 25.5 On 7 July 2004, the Company entered into a water supply agreement for the Koh Samui Waterworks with Universal Utilities Company Limited for a 15-year period from the first water distribution date (12 May 2005) whereby the subsidiary agreed to construct the reverse osmosis water production system with the water pipeline connected to both the water distribution pipeline of the purchasers in the specified area and the Provincial Waterworks Authority, and sell the tap water produced under such system for a return determined at the rates as specified in the agreement of the volume actually received by the purchasers. The rates will by adjusted annually. The Subsidiaries 25.6 Chachoengsao Water Supply Company Limited entered into the concession agreement dated 9 November 2000 with the Provincial Waterworks Authority. The subsidiary is privileged to produce and sell tap water to the Provincial Waterworks Authority at Chachoengsao office, Chachoengsao province. The concession period is 25 years from the date that first income is derived from selling tap water (1 April 2003). 25.7 Bangpakong Water Supply Company Limited entered into the concession agreement dated 9 November 2000 with the Provincial Waterworks Authority. The subsidiary is privileged to produce and sell tap water to the Provincial Waterworks Authority at Bangpakong office, Chachoengsao province. The concession period is 25 years from the date that first income is derived from selling tap water (1 April 2003). 25.8 Nakornsawan Water Supply Company Limited entered into the concession agreement dated 7 November 2000 with the Provincial Waterworks Authority. The subsidiary is privileged to produce and sell tap water to the Provincial Waterworks Authority at Nakornsawan office, Nakornsawan province. The concession period is 25 years from the date that first income is derived from selling tap water (1 March 2003). 25.9 Chachoengsao Water Supply Company Limited and Bangpakong Water Supply Company Limited entered into a know-how agreement dated 1 December 2000 with Australian Water Technologies PTY Limited of Australia, which transferred its entitlements under this agreement to AWT International (Thailand) Limited on 15 October 2002, whereby the latter agreed to permit the use of its name for reference purposes and provide the know-how to enable the said subsidiaries to perform their obligations under concession agreements for a period of 25 years from the first date of sales of tap water under the concession agreements. In consideration thereof, the subsidiary companies agree to pay fees at the rate stipulated in the agreement. 25.10 On 27 June 2002, Eastern Hobas Pipes Company Limited entered into a License and Know-How Transfer Agreement with a related company in Austria, whereby the latter grants the subsidiary the exclusive right to manufacture products in accordance with know-how and patents rights as well as the non-exclusive right to market and sell the products within the territory specified in the agreement. In consideration thereof, the subsidiary is committed to pay a royalty fee at a certain percentage based on the net sales value of the products manufactured, by the subsidiaryÝs plant, based on the ex-works price as invoiced to customers, as specified in the agreement. The term of the agreement is 10 years and it is renewable for another term of 5 years. 25.11On 24 March 2004, Universal Utilities Company Limited entered into an agreement with Eccomtara Company Limited, a related company, to produce tap water and to provide maintenance services for the tap water production system and tap water distribution pipeline of the production plants situated in Lak Muang, Ratchaburi province and Pangpuoy, Samut Songkram province. The agreement period is 6 years and stipulates an annual fee, with payment to be made on a monthly basis and adjusted to the actual amount at the end of each year in accordance with the guidelines and conditions stipulated in the agreement. 25.12On 27 September 2006, Universal Utilities Company Limited and a private company (the consortium) entered into an agreement, having a total contract value of Baht 534.9 million, with Metropolitan Waterworks Authority (çMWAÊ) whereby the joint venture is to sell and install information technology improvement systems for the water loss management. The works have to be completed within 600 days from 25 October 2005. 25.13On 14 March 2006, Universal Utilities Company Limited and its subsidiaries entered into an agreement with a private company allowing the private company to produce tap water for sales to Rayong Waterworks, Rayong province and the Provincial Waterworks Authority for a 25-year period commencing from the first tap water selling date (12 July 2006). Under the agreement, the subsidiaries are required to construct tap water production system, water delivery system and water distribution system, and to expand the production capacity of the 68
Eastern Water Resources Development and Management Plc.
existing tap water distribution system of Rayong Waterworks. The subsidiaries are also required to provide maintenance services and to act on behalf of the Provincial Waterworks Authority in any related matters. Ownership of assets, which have been constructed, repaired and expanded by the subsidiaries, is to be transferred to the Provincial Waterworks Authority immediately upon completion of these activities, with the subsidiaries having the rights to occupy the assets in order to produce and supply tap water to the Provincial Waterworks Authority over the agreement period. The subsidiaries will receive income at the rates prescribed in the agreement and the rates will be adjusted annually. 26. FINANCIAL INFORMATION BY SEGMENT The Company and its subsidiaries have been operating the businesses of producing water for sales, managing water distribution networks in the Eastern Seaboard areas of Thailand, doing waste water treatment and related businesses, producing water distribution pipeline for sales, selling drinking water through water vending machines, and producing and providing installation services of water vending machines. These business operations are conducted only in one geographical area, which is Thailand. Although the Company and its subsidiaries have been operating in a variety of business relating to producing and selling water. Their management consider the Group’s core businesses are raw water distribution business, tap water distribution business, water pipeline distribution business, waterworks management and water loss reduction project. The financial information of the Company and its subsidiaries is therefore presented by such business segments. The segment information for the years ended 30 September 2006 and 2005 is summarised as follows :26.1 Operating result by business segment (Unit : Thousand Baht) Consolidated For the year ended 30 September 2006 Sales - other Water Raw water Tap water pipeline distribution distribution distribution business busines business Revenue Revenue from external customers 1,356,099 Inter-segment revenue 47,996 Total revenue 1,404,095 Cost of sales/services (535,437) Operation profit Segment operating profit (loss) 868,658 Unallocated revenue/expenses Interest income and dividend income Other income Selling, servicing and administrative expenses Interest expenses Corporate income tax Minority interests Net earnings for the year
Service income
Other
Waterworks Water loss management reduction business project
Other service income
317,062 317,062 (211,202)
180,084 65,414 245,498 (252,863)
45,663 452 46,115 (32,403)
27,468 124,192 151,660 (118,132)
404,601 404,601 (395,831)
33,865 6,858 40,723 (27,782)
105,860
(7,365)
13,712
33,528
8,770
12,941
Elimination
Total
2,364,842 (244,912) (244,912) 2,364,842 231,697 (1,341,953) (13,125)
1,022,889 20,120 15,974 (275,796) (93,189) (227,343) 45,154 507,809
Annual Report 2006
69
(Unit : Thousand Baht) Consolidated For the year ended 30 September 2005 Sales - other Water Raw water Tap water pipeline distribution distribution distribution business busines business Revenue Revenue from external customers 1,317,758 Inter-segment revenue 26,298 Total revenue 1,344,056 Cost of sales/services (511,264) Operation profit Segment operating profit (loss) 832,792 Unallocated revenue/expenses Interest income and dividend income Other income Selling, servicing and administrative expenses Interest expenses Corporate income tax Minority interests Net earnings for the year
217,254 217,254 (120,511) 96,743
Service income
Other
97,631 238,953 217,751 1,636 315,382 240,589 (284,561) (208,185) 30,821
32,404
Waterworks Water loss management reduction business project
Other service income
Elimination
Total
21,376 65,139 86,515 (72,877)
101,512 101,512 (97,526)
37,001 6,524 43,525 (23,347)
2,031,485 (317,348) (317,348) 2,031,485 306,993 (1,011,278)
13,638
3,986
20,178
(10,355)
1,020,207 55,743 6,344 (254,801) (142,951) (206,728) 22,237 500,051
(Unit : Thousand Baht) The Company Only For the year ended 30 September 2006 Sales - other Raw water Tap water distribution distribution business business Others Total Revenue Revenue from external customers 1,356,099 Inter-segment revenue 47,996 Total revenue 1,404,095 Cost of sales/services (535,437) Segment operating profit 868,658 Unallocated revenue/expenses Interest income and dividend income Other income Share of loss from investments accounted for under equity method Selling, servicing and administrative expenses Interest expenses Corporate income tax Net earnings for the year
70
Eastern Water Resources Development and Management Plc.
123,562 123,562 (122,135) 1,427
11,230 608 11,838 (10,515) 1,325
1,490,891 48,604 1,539,495 (668,085) 871,410 40,425 3,301 (430) (143,897) (67,991) (195,009) 507,809
(Unit : Thousand Baht) The Company Only For the year ended 30 September 2006 Sales - other Raw water Tap water distribution distribution business business Others Total Revenue Revenue from external customers Inter-segment revenue Total revenue Cost of sales/services Segment operating profit Unallocated revenue/expenses Interest income and dividend income Share of profit from investments accounted for under equity method Other income Selling, servicing and administrative expenses Interest expenses Corporate income tax Net earnings for the year
1,317,758 26,298 1,344,056 (511,264) 837,792
63,515 63,515 (63,187) 328
4,840 1,874 6,714 (5,802) 912
1,386,113 28,172 1,414,285 (580,253) 834,032 70,880 24,595 5,548 (127,465) (127,029) (180,510) 500,051
26.2 Asset information by business segment (Unit : Thousand Baht) Consolidated As at 30 September 2006
Property, plant and equipment - net Assets under concession contracts - net Other assets Total assets
Water Raw water Tap water pipeline Waterworks Water loss distribution distribution distribution management reduction business business business business project
Others
7,036,467 7,058 318,629 1,734,676 686,065 8,771,143 1,011,752
10,911 (30,836) 7,693,239 423,099 100,557 (1,196,950) 1,652,582 111,468 (1,227,786) 9,654,292
485,019 213,606 698,625
184,620 104,470 114,628 289,090
-
Elimination
Total
(Unit : Thousand Baht) Consolidated As at 30 September 2005
Property, plant and equipment - net Assets under concession contracts - net Other assets Total assets
Water Raw water Tap water pipeline Waterworks Water loss distribution distribution distribution management reduction business business business business project
Others
4,744,325 2,765,767 7,510,092
12,771 (91,938) 5,296,304 220,113 136,085 (1,277,827) 2,592,484 148,856 (1,369,765) 8,108,901
5,122 142,226 546,227 693,575
462,679 307,604 770,283
163,345 77,887 114,628 355,860
-
Elimination
Total
Annual Report 2006
71
(Unit : Thousand Baht) The Company Only As at 30 September 2006
Property, plant and equipment - net Other assets Total assets
Raw water distribution business
Tap water distribution business
Others
Total
7,036,467 1,734,676 8,771,143
2,185 2,185
45 45
7,038,697 1,734,676 8,773,373
(Unit : Thousand Baht) The Company Only As at 30 September 2006
Property, plant and equipment - net Other assets Total assets
Raw water distribution business
Tap water distribution business
Others
Total
4,744,325 2,765,767 7,510,092
1,127 1,127
60 60
4,745,512 2,765,767 7,511,279
27. SALE OF RAW WATER AND TAP WATER BY DISTRIBUTION NETWORKS/AREAS 27.1 Sales volume of raw water and tap water classified by water distribution networks a) Sales volume of raw water (Unit : Million Litres) The Company Only For the years ended 30 September 2006 2005 45,593 45,757 71,223 64,049 52,918 55,343 20,729 15,217 8,892 9,734 199,355 190,100
Nong Pla Lai - Map Ta Pud Network Dok Krai - Map Ta Pud Network Nong Khor - Laem Chabang Network Nong Pla Lai - Nong Khor Network Chachoengsao Network Total
b) Sales volume of tap water
Chachoengsao waterwork Bangpakong waterwork Nakornsawan waterwork Sattahip waterwork Koh Samui waterwork Koh Seechang waterwork Borwin waterwork Total
72
Eastern Water Resources Development and Management Plc.
Consolidated For the years ended 30 September 2006 2005 8,991 8,523 7,352 6,868 2,149 1,982 7,171 4,303 808 272 33 37 23 26,527 21,985
(Unit : Million Litres) The Company Only For the years ended 30 September 2006 2005 7,171 4,303 808 272 33 37 23 8,035 4,612
27.2 Sales, cost of sales and gross profit of raw water, and property, plant and equipment, classified by water distribution networks (Unit : Thousand Baht)
Sales of raw water Costs of sales Gross profit (loss) Property, plant and equipment - net
Nong Pla Lai - Map Ta Pud Network 364,741 (128,327) 236,414
Dok Krai Map Ta Pud Network 543,126 (127,715) 415,411
997,743
127,347
The Company Only For the year ended 30 September 2006 Nong Khor Nong Pla Lai Laem Chabang Nong Khor Network Network 287,123 132,870 (117,386) (60,314) 169,737 72,556 2,629,961
Chachoengsao Network 76,235 (101,695) (25,460)
145,745
Total 1,404,095 (535,437) 868,658
1,988,370
(Unit : Thousand Baht)
Sales of raw water Costs of sales Gross profit (loss) Property, plant and equipment - net
Nong Pla Lai - Map Ta Pud Network 366,057 (118,109) 247,948
Dok Krai Map Ta Pud Network 496,862 (118,863) 377,999
1,022,444
128,537
The Company Only For the year ended 30 September 2005 Nong Khor Nong Pla Lai Laem Chabang Nong Khor Network Network 301,529 102,625 (138,078) (43,587) 163,451 59,038 1,016,215
Chachoengsao Network 76,983 (92,627) (15,644)
153,297
Total 1,344,056 (511,264) 832,792
2,047,657
Sales of Nong Khor - Laem Chabang Network are as follows (Unit : Thousand Baht) The Company Only For the years ended 30 September 2006 2005 Nong Khor - Laem Chabang Network 1 Nong Khor - Laem Chabang Network 2 Total
211,731 75,392 287,123
229,178 72,351 301,529
27.3 Sales, costs of sales and gross profit of tap water area (Unit : Thousand Baht) Consolidated For the year ended 30 September 2006
Sales of tap water Costs of sales Gross profit
Chachoengsao Bangpakong Nakornsawan Sattahip Koh Seechang waterwork waterwork waterwork waterwork waterwork 86,284 67,508 21,362 84,276 2,046 (36,979) (26,855) (12,696) (83,223) (2,046) 49,305 40,653 8,666 1,053 -
Koh Samui waterwork 36,914 (36,545) 369
Borwin waterwork 326 (321) 5
Rayong waterwork 18,346 (12,537) 5,809
Elimination 64,815 64,815
Total 317,062 (146,387) 170,675
Annual Report 2006
73
(Unit : Thousand Baht)
Chachoengsao Bangpakong Nakornsawan waterwork waterwork waterwork Sales of tap water Costs of sales Gross profit
27.4
77,402 (31,569) 45,833
58,355 (23,779) 34,576
17,982 (1,976) 16,006
Consolidated For the year ended 30 September 2005 Sattahip Koh Seechang Koh Samui Borwin waterwork waterwork waterwork waterwork 44,970 (44,803) 167
2,393 (2,393) -
16,152 (15,991) 161
-
Rayong waterwork
Elimination
Total
-
29,607 29,607
217,254 (90,904) 126,350
Sales of raw water by type of customer (Unit : Percentage) The Company Only For the years ended 30 September 2006 2005 59 61 28 26 13 13 100 100
Industrial Estate Waterworks Authority Factories Total
28. FINANCIAL INSTRUMENTS A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity. The Company and its subsidiaries have no policy to speculate in or engage in the trading of any derivative financial instruments. 28.1 Credit Risk Credit risk is the risk that the counterparty to a financial instrument will fail to comply with the conditions or agreements specified in the financial instruments, causing the Company and its subsidiaries to incur a financial loss. The maximum amount of credit risk is the carrying value of the financial assets after deducting allowance for doubtful accounts and/or provision for impairment loss as stated in the balance sheets, and the risk incurred as a result of loan guarantees to related parties and other parties (if any). 28.2 Interest rate risk Interest rate risk is the risk that changes in market interest rates may lead to changes in the value of financial instruments, and fluctuations in revenue or the value of financial assets and liabilities. Interest rate risk is incurred as a result of interest rate structure and the characteristics and structure of the Company没s and its subsidiaries没 assets, liabilities and capital. As at 30 September 2006 and 2005, financial assets and liabilities classified by interest rate types, are as follows: (Unit : Thousand Baht) Consolidated Outstanding balances of financial instruments as at 30 September 2006 Floating interest rates Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net Billed receivable from water loss reduction plan - related party Restricted bank deposits Long-term investments
74
Eastern Water Resources Development and Management Plc.
Fixed interest rates
Non-interest bearing
Total
270,355 -
2,986 -
1,169 449,275
271,524 2,986 449,275
-
11,610 10,000
11,118 85,387
11,118 11,610 95,387
(Unit : Thousand Baht) Consolidated Outstanding balances of financial instruments as at 30 September 2006 Floating interest rates Financial liabilities Short-term loans from financial institutions Trade accounts payable Short-term loans from related party Long-term loans from related party Long-term loans from financial institutions Debentures Retentions payable
60,000 311,000 -
Fixed interest rates 5,000 100,000 1,510,000 2,500,000 -
Non-interest bearing 244,599 25,143
Total 60,000 244,599 5,000 100,000 1,821,000 2,500,000 25,143
(Unit : Thousand Baht) Consolidated Outstanding balances of financial instruments as at 30 September 2005 Floating Fixed Non-interest interest rates interest rates bearing Total Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net Billed receivable from water loss reduction plan - related party Restricted bank deposits Long-term investments Financial liabilities Short-term loans from financial institutions Trade accounts payable Long-term loans from financial institutions Debentures Retentions payable
335,762 -
719,811 -
351,386
335,762 719,811 351,386
-
28,936 190,275
5,476 85,387
5,476 28,936 276,112
50,000 269,500 -
2,500,000 -
151,404 27,819
50,000 151,404 269,500 2,500,000 27,819
(Unit : Thousand Baht) The Company Only Outstanding balances of financial instruments as at 30 September 2006
Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net Short-term loans to related parties Other receivable - related parties
Floating interest rates
Fixed interest rates
Non-interest bearing
205,217 -
2,838 113,350 -
199 145,251 10,956
Total 205,416 2,838 145,251 113,350 10,956
Annual Report 2006
75
(Unit : Thousand Baht) The Company Only Outstanding balances of financial instruments as at 30 September 2006
Restricted bank deposits Investments accounted for under equity method Long-term investments Long-term loans to related parties Financial liabilities Trade accounts payable Long-term loans from financial institutions Debentures Retentions payable
Floating interest rates
Fixed interest rates
Non-interest bearing
-
9,156 10,000 362,890
676,049 85,387 -
9,156 676,049 95,387 362,890
25,000 -
1,500,000 2,500,000 -
17,670 13,991
17,670 1,525,000 2,500,000 13,991
Total
(Unit : Thousand Baht) The Company Only Outstanding balances of financial instruments as at 30 September 2005
Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net Short-term loans to related parties Other receivable - related parties Restricted bank deposits Investments accounted for under equity method Long-term investments Long-term loans to related parties Financial liabilities Trade accounts payable Debentures Retentions payable
Floating interest rates
Fixed interest rates
Non-interest bearing
204,469 -
719,665 180,000 10,356 190,725 330,890
174 121,532 6,995 614,953 85,387 -
204,643 719,665 121,532 180,000 6,995 10,356 614,953 276,112 330,890
-
2,500,000 -
13,828 17,713
13,828 2,500,000 17,713
Total
The fixed interest rate financial instruments, which have new repricing dates or maturity dates (whichever are sooner) after the balance sheet dates, are as follows:
76
Eastern Water Resources Development and Management Plc.
(Unit: Thousand Baht) Consolidated As at 30 September 2006 Remaining periods to repricing dates or maturity dates Less than 1-5 Over 5 No At call 1 year years years maturity
Total
Interest rate %
Financial assets Short-term investments Restricted bank deposits Long-term investments Financial liabilities Short-term loans from related party Long-term loans from related party Long-term loans from financial institutions Debentures
-
2,986 11,610 -
10,000
-
-
2,986 11,610 10,000
1.00 - 3.25 1.00 - 3.25 4.25
-
5,000 -
100,000 1,510,000 2,500,000
-
-
5,000 100,000 1,510,000 2,500,000
5.50 5.50 5.50 - 6.00 4.60, 5.75
(Unit: Thousand Baht) Consolidated As at 30 September 2005 Remaining periods to repricing dates or maturity dates Less than 1-5 Over 5 No At call 1 year years years maturity Financial assets Short-term investments Restricted bank deposits Long-term investments Financial liabilities Debentures
Total
Interest rate %
-
719,811 28,936 -
190,725
-
-
719,811 28,936 190,275
0.50 - 4.25 1.00 - 2.00 2.90 - 4.20
-
-
1,300,000
1,200,000
-
2,500,000
4.60, 5.75
(Unit: Thousand Baht) The Company Only As at 30 September 2006 Remaining periods to repricing dates or maturity dates Less than 1-5 Over 5 No At call 1 year years years maturity Financial assets Short-term investments Short-term loans to related parties Restricted bank deposits Long-term investments Long-term loans to related parties Financial liabilities Long-term loans from financial institution Debentures
Total
Interest rate %
-
2,838 113,350 9,156 -
10,000 362,890
-
-
2,838 113,350 9,156 10,000 362,890
1.00 - 3.25 3.50 1.00 - 5.00 4.25 5.50
-
-
1,500,000 2,500,000
-
-
1,500,000 2,500,000
6.00 4.60, 5.75
Annual Report 2006
77
(Unit: Thousand Baht) The Company Only As at 30 September 2005 Remaining periods to repricing dates or maturity dates At call
Less than 1 year
1-5 years
Over 5 years
No maturity
Total
Interest rate %
-
719,665 180,000 10,356 -
190,725 330,890
-
-
719,665 180,000 10,356 190,725 330,890
0.50 - 4.25 2.50, 5.50 1.00 - 2.00 2.W8 - 4.20 5.50
-
-
1,300,000
1,200,000
-
2,500,000
4.60, 5.75
Financial assets Short-term investments Short-term loans to related parties Restricted bank deposits Long-term investments Long-term loans to related parties Financial liabilities Debentures
28.3 Liquidity risk Liquidity risk is the risk that the Company and its subsidiaries will be unable to liquidate financial assets and/or procure sufficient funds to discharge obligations in a timely manner, resulting in a financial loss. The periods to the maturity dates of financial instruments held as of 30 September 2006 and 2005, counting from the balance sheet date, are as follows: (Unit : Thousand Baht) Consolidated As at 30 September 2006 At call Financial assets Cash and cash equivalents 271,524 Short-term investments Trade accounts receivables - net Billed receivable from water loss reduction plan - related party Restricted bank deposits Long-term investments Financial liabilities Short-term loans from financial institutions Trade accounts payable Short-term loans from related party Long-term loans from related party Long-term loans from financial institution Debentures Retentions payable -
Within 1 year
1-5 years
Over 5 years
No maturity
Total
2,986 449,275
-
-
-
271,524 2,986 449,275 11,118 11,610 95,387
11,118 11,610 -
10,000
-
85,387
60,000 244,599 5,000 165,000 -
100,000 1,656,000 2,500,000 25,143
-
-
60,000 244,599 5,000 100,000 1,821,000 2,500,000 25,143
(Unit : Thousand Baht) Consolidated As at 30 September 2005
Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net
78
At call
Within 1 year
1-5 years
Over 5 years
No maturity
Total
335,762 -
719,811 351,386
-
-
-
335,762 719,811 351,386
Eastern Water Resources Development and Management Plc.
(Unit : Thousand Baht) Consolidated As at 30 September 2005
Billed receivable from water loss reduction plan - related party Restricted bank deposits Long-term investments Financial liabilities Short-term loans from financial institutions Trade accounts payable Long-term loans from financial institution Debentures Retentions payable
At call
Within 1 year
1-5 years
Over 5 years
No maturity
Total
-
5,476 28,936 -
190,725
-
85,387
5,476 28,936 276,112
-
50,000 151,404 32,500 -
237,000 1,300,000 27,819
1,200,000 -
-
50,000 151,404 269,500 2,500,000 27,819
(Unit : Thousand Baht) The Company Only As at 30 September 2006
Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net Short-term loans to related parties Other receivable - related parties Restricted bank deposits Investments accounted for under equity method Long-term investments Long-term loans to related parties Financial liabilities Trade accounts payable Long-term loans from financial institution Debentures Retentions payable
At call
Within 1 year
1-5 years
Over 5 years
No maturity
Total
205,416 -
2,838 145,251 113,350 10,956 9,156
-
-
-
205,416 2,838 145,251 113,350 10,956 9,156
-
-
10,000 100,000
262,890
676,049 85,387 -
676,049 95,387 362,890
-
17,670 100,000 -
1,425,000 2,500,000 13,991
-
-
17,670 1,525,000 2,500,000 13,991
(Unit : Thousand Baht)
Financial assets Cash and cash equivalents Short-term investments Trade accounts receivables - net Short-term loans to related parties Other receivable - related parties Restricted bank deposits Investments accounted for under equity method Long-term investments Long-term loans to related parties Financial liabilities Trade accounts payable Debentures Retentions payable
The Company Only As at 30 September 2005 1-5 Over years 5 years
At call
Within 1 year
No maturity
Total
204,643 -
719,665 121,532 180,000 6,995 10,356
-
-
-
204,643 719,665 121,532 180,000 6,995 10,356
-
-
190,725 100,000
230,890
614,953 85,387 -
614,953 276,112 330,890
-
13,828 -
1,300,000 17,713
1,200,000 -
-
13,828 2,500,000 17,713
Annual Report 2006
79
28.4 Foreign currency risk The subsidiary has the foreign currency - dominated liabilities, giving rise to an exposure to changes in foreign exchange rates. Management therefore consider the use of forward exchange contracts to hedge such exchange risk from time to time, as appropriate. However, there is no outstanding forward exchange contract at the balance sheet date and the management considers that such foreign currency - dominated liabilities is not material. As at 30 September 2006 and 2005, the subsidiary没s foreign currency-denominated liabilities which were not hedged by derivative financial instruments were as follow. Foreign currency EURO USD
Liabilities as at 30 September 2006 2005 424,607 195,442
230,402 150,178
Exchange rate as at 30 September 2006
2005
47.9181 Baht per Euro 37.6373 Baht per USD
49.6372 Baht per Euro 41.1075 Baht per USD
28.5 Fair value Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable and willing parties in an arm没s length transaction. The Company and its subsidiaries have estimated the fair value of financial instruments as follows: (a) Financial assets Determination of the fair value is dependent upon the characteristics of the financial instruments. The fair values of most financial assets, including cash and cash equivalents, investments, trade accounts receivable, receivable from water loss reduction plan and loans, are the amounts as presented in the balance sheets, which approximate their respective carrying values since the values of such financial instruments are predominantly subject to market interest rates and/or maturity due within 1 year with the exception of long-term investments and long-term loans to related parties, which bear fixed rates of interest and have repricing periods longer than 1 year. Financial instruments with standard terms and conditions which are traded on an active and liquid market, such as investments, have their fair value determined by the quoted market prices. As at 30 September 2006 and 2005, there were no material differences between the book value of financial assets of the Company and its subsidiaries and their respective fair value, except for the Company没s and its subsidiaries没 held-to-maturity debt securities, which classified as long-term investments, having the fair values as at 30 September 2006 of approximately Baht 9.6 million (the Company Only : fair values of long-term investments and long-term loans to related parties are approximately Baht 9.6 million and Baht 358 million, respectively). The fair values of held-to-maturity debt securities, which classified as long-term investments, and long-term loans to related parties are estimated by discounting the cash flows expected to be received by the Company and its subsidiaries on those investments and loans by the current market interest rates on borrowings.
80
Eastern Water Resources Development and Management Plc.
(b) Financial liabilities The fair values of financial liabilities, including trade accounts payable, advance received, loans, debentures and retentions payable, are the amounts as stated in the balance sheets due to the same reasons as described above, with the exception of long-term loans from financial institutions, long-term loans from related party and debentures bearing fixed rates of interest and having repricing periods of longer than 1 year. As at 30 September 2006 and 2005, there were no material differences between the book value of financial liabilities of the Company and its subsidiaries and their respective fair value, except for the Companyûs and it subsidiariesû long-term loans from financial institutions, long-term loans from related party and debentures having the fair values as at 30 September 2006 of approximately Baht 1,784 million, Baht 94 million and Baht 2,494 million, respectively (the Company Only : fair values of long-term loans from financial institutions and debentures are approximately Baht 1,488 million and Baht 2,494 million, respectively). The fair values of long-term loans from financial institutions, long-term loans from related party and debentures are estimated by discounting the cash flows expected to be used to repay principal and interest to the lenders, related party and bondholders by the Company and its subsidiaries by the bond yield rates quoted in the debt market (in case that there is a secondary debt securities market) or by the current market interest rates on borrowings (in case that there is no secondary debt securities market). 29. SUBSEQUENT EVENT On 11 October 2006, the Federation of Accounting Professions (çFAPé) issued the Notification No. 26/ 2006 regarding Accounting Standard No. 44 çConsolidated Financial Statements and Accounting for Investments in Subsidiariesé (Amendment No. 1), under which investments in subsidiaries, jointly controlled entities and associates are to be presented in the separate financial statements under the cost method rather than the equity method. Entities which are not ready to adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and adopt the cost method as from 1 January 2007. The above-mentioned notification was announced in the Royal Gazette and became effective on 3 0 October 2006. 30. PRESENTATION Certain amounts in the financial statements for the year ended 30 September 2005 have been reclassified to conform to the current yearûs classification, with no effect on previously reported net earnings and shareholdersû equity. 31. APPROVAL OF FINANCIAL STATEMENTS These financial statements were authorised for issue by the Companyûs Board of Directors on 29 November 2006.
Auditorûs Fee for the Fiscal Year 2006 On 27 January 2006 the General Shareholdersû Meeting passed a resolution to appoint Mrs. Saifon Inkaew, License No. 4434 or Mr. Ratana Jala, License No. 3734 or Mr. Narong Pantawong, License No. 3315 to be the company auditor and provides opinions on the companyûs financial statements for the fiscal year 2006 on behalf of Ernst & Young office Limited. The remunerations on the part of the company were fixed at 720,000 Baht. (The inclusive auditorûs fee for the company and its subsidiaries was fixed at 2,160,000 Baht)
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General Information Eastern Water Resources Development and Management Public Company Limited Head Officeûs Address 9/9 Vipavadee Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210 Tel. (662) 940-9731-2, 940-9974-6 Fax (662) 561-3793, 940-7520 Core Business Develop and manage water resources through raw water pipeline distribution to customers, provide consultancy services on clean water production and pipeline distribution system in industrial estates or factories, repair and supply all kinds of equipment and materials related to water distribution, provide consultancy services on the maintenance of pipelines, equipment and machinery, and participate in joint-venture projects with private sector Number of Employees As of 30th September 2006, the company had 93 employees in total. This consisted of 47 head officeûs staff, 33 Rayong operation centerûs staff and 13 Chachoengsao-Chonburi Operation Centerûs officeûs staff. Date of Listing in the Stock Exchange of Thailand June-July 1997 with an initial offering in the Stock Exchange of Thai land on 28th July 1997 Type and Volume of Shared Offered 166,500,000 ordinary shares with a par value of 10 baht/share Registered and Paid-up Capital 1,665-million baht registered capital consisting of 166.5 million ordinary shares with a par value of 10 baht/share, 1,299 million baht of which is paid-up capital
Subsidiaries Global Water Systems Corporation Limited Officeûs Address 92/6 Moo 3, Chaengwattana Rd., Talad Bangkhen, Laksi, Bangkok 10210 Company Registration No. 0105540103750 dated 25th December 1997 Tel. (662) 551-4384, 973-6391 Fax (662) 973-6395, 973-4653 Core Business Produce and supply water from water-vending machine and provide repairing and maintenance services Number of Employees As of 30th September 2006, the company had 8 employees in total. Type and Volume of 740,000 ordinary shares with a par value of 100 baht/share Shared Offered Registered and Paid-up Capital 74-million baht registered capital all of which is paid-up Universal Utilities Company Limited Officeûs Address Company Registration Tel. Fax Core Business
82
9/9 Vipavadee Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210 No. 0105541077817 dated 15th December 1998 (662) 940-9041-2 (662) 940-9043 Manage waterworks business and wastewater treatment system in the form of concession, hiring contract or leasing contract, provide engineering services related to core business with the mission to be a leader of Thai-owned waterworks business in terms of production capacity, quality of services focusing on personnel expertise and technological development
Eastern Water Resources Development and Management Plc.
Number of Employees
that enhances the organizationûs efficiency and international competitiveness under the principle of clean and environment-friendly technological development As of 30th September 2006, the company had 81 employees in total. This consisted of 31 head officeûs staff and 50 staff in operational areas. 51,000,000 ordinary shares at a par value of 10 baht/share
Type and Volume of Shared Offered Registered and Paid-up Capital 510-million baht registered capital all of which is paid up Nakornsawan Water Supply Co., Ltd. Officeûs Address Company Registration Tel./Fax Core Business
9/9 Vipavadee Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210 No. 01005543098421 dated 19th October 2000 (056) 355-789, (662) 940-9041-2 Waterworks management including tap water production and supply to Nakornsawan Waterworks and water users services such as meter reading, engineering services like pipeline maintenance Included in Universal Utilitiesû employee number 8,000,000 shares with a par value of 5 baht/share
Number of Employees Type and Volume of Shared Offered Registered and Paid-up Capital 40-million baht registered capital all of which is paid up Chachoengsao Water Supply Co., Ltd. Officeûs Address Company Registration Tel. Fax. Core Business
9/9 Vipavadee Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210 No. 0105543098412 dated 19th October 2000 (038) 814-428-9, (662) 940-9041-2 (038) 814-428, (662) 940-9043 Waterworks management including tap water production and supply to Chachoengsao Waterworks and water users services such as meter reading, engneering services like pipeline maintenance As of 30th September 2006, the company had 18 employees in total. 10,000,000 ordinary shares with a par value of 10 baht/share
Number of Employees Type and Volume of Shared Offered Registered and Paid-up Capital 100-million baht registered capital all of which is paid up Bangpakong Water Supply Co., Ltd. Officeûs Address Company Registration Tel./Fax Core Business
9/9 Vipavadee Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210 No.0105543098439 dated 19th October 2000 (038) 840-786, (662) 940-9041-2 Waterworks management including tap water production and supply to Bangpakong Waterworks and water users services such as meter reading, engineering services like pipeline maintenance As of 30th September 2006, the company had 19 employees in total. 4,000,000 ordinary shares with a par value of 10 baht/share
Number of Employees Type and Volume of Shared Offered Registered and Paid-up Capital 40-million baht registered capital all of which is paid up
Annual Report 2006
83
Eastern Hobas Pipes Co., Ltd. Officeûs Address Company Registration Tel. Fax Core Business Number of Employees
9/9 Vipavadee Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210 No. 10254500592 dated 18th June 2002 (662) 940-8351, 940-8358 (662) 940-8744 Produce and supply CC-GRP pipes for raw water, tap water and wastewater businesses As of 30th September 2006, the company had 67 employees in total. This consisted of 17 head officeûs staff and 50 plant officeûs staff 25,000,000 ordinary shares with a par value of 10 baht/share
Type and Volume of Shared Offered Registered and Paid-up Capital 250-million baht registered capital all of which is paid up
Other Company Egcom Tara Company Limited Officeûs Address
EGCO Tower, 222 Moo 5, Vibhavadi Rangsit Rd., Tungsonghong, Laksi, Bangkok 10210 Company Registration No. (6) 229/2542 Tel. (662) 998-5000, 998-5999 Fax (662) 955-0945 Core Business Produce and supply tap water Registered and Paid-up Capital 345-million baht registered capital consisting of 34.5-million ordinary shares with a par value of 10 baht/share all of which is paid up
Auditor Mrs. Saifon Inkaew Ernst & Young Office Limited Officeûs Adress Tel. Fax
CPA Registration No. 4434 33rd Floor, Lake Rajada Office Complex, 193/136-137 Rajadapisek Rd., Klongtoey, Bangkok 10110 (PO Box 1047, Bangkok 10501) (662) 264-0777, 661-9190 (662) 264-0789-90, (662) 661-9192
Other References Thailand Securities Depository Co., Ltd. Officeûs Address 4th and 6th-7th Floor, 62 Stock Exchange of Thailand Building,Ratchadapisek Rd., Klongtoey, Bangkok 10110 Tel. (662) 229-2800, 654-5599 Fax (662) 359-1262-3
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Eastern Water Resources Development and Management Plc.
Name of the Board of Directors and Committee Members of Eastern Water Resource Development and Management Public Company Limited No. 1 2 3 4 5 6 7 8 9 10 11
Audit Committee
Board of Directors Mr. Sujarit Mr. Utid M.R. Tongnoi Dr. Borwornsak Mr. Anucha Dr. Prasert Mr. Uthai Pol.Gen. Visut Mr. Somchai Mr. Somnuk Mr. Wanchai
Patchimun2 Tamwatin2 Tongyai3 Uwanno2 Mokkavesa3 Chuaphanich3 Juntima2 Kittivatana3 Boonnamsiri2 Kyavatanakij2 Lawatanatrakul1
Corporate Governance Committee
Nomination & Remuneration Committee Chairman Member
Chairman
Chairman
Investment Committee
Risk Management Committee
Chairman
Member Chairman
Member
Member Member Member
Director
Member Secretary
Member Member Member and Secretary
Member Member and Secretary
Advisors to the Board of Directors 1 2 3 4 5 6 7
Mr. Banphot Hongthong Mr. Samart Chokkanapitark Mr. Chairerk Disatha-amnarij Pol.Lt.Gen.Wichianchot Sukchotrat.Ph.D. Mr.Vasan Peetipeerakul Mr. Chaiyasit Hotarakit M.L. Panasarn Hasdin
Member Member Member
Other Advisors 1
Mrs. Leena
Charensri
Advisor
Others 1
Mrs. Namphon Rossadanukul
Remarks: 1. ED (Executive Director) 2. ID 3. Other NED
Secretary
Secretary
= Executive Directors (holding the executive position in the company) = Independent Directors/ Audit Committee Members with qualifications stipulated by the Securities Exchange of Thailand = Non-Executive Directors who are not Independent Directors/ Audit Committee Members
Annual Report 2006
85
First 10 major shareholders as of November 30, 2006
No. 1 2 3 4 5 6 7 8 9 10
Shareholders
Number of Shares
%
Provincial Waterworks Authority Electricity Generating Public Company Limited Norbax Inc.,13 The Industrial Estate Authority of Thailand Thai NVDR Company Limited State Street Bank And Trust Company, For London Aberdeen Growth Fund Somers (U.K.) Limited Mrs. Suda Supantarida American International Assurance Company, Limited-Tiger TOTAL
528,000,000 245,876,210 92,644,000 60,000,000 39,598,200 36,700,000 21,825,800 18,578,000 15,831,900
39.88 18.57 7.00 4.53 2.99 2.77 1.65 1.40 1.20
15,000,000 1,074,054,110
1.13 81.12
Remarks : Investors can review current shareholders没 information from company没s website prior to the Annual General Shareholders没 Meeting.
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Eastern Water Resources Development and Management Plc.
Definition of Independent Director An independent director 1. Holds less than 5 percent of all of the shares with voting rights in the company, any of its subsidiaries, an affiliated company, or anyone who may have a conflict of interest with the company (including the persons listed under Section 258 of the Securities and Exchange Act B.E. 2535). or 2. An independent director should not be a close relative of any executive member or a majority shareholder of the company, any of its subsidiaries, an affiliated company, or of anyone who may have a conflict of interest with the company. An independent director has not been appointed as a representative to safeguard the interests of the company没s director or a major shareholder, unless there is written confirmation granting the said person the right to exercise independent opinions in performing his/her duties as the company没s director without giving any consideration to his/her relationship to the party he/she works for and he/she can efficiently offer suggestions/comments that are consistently in the interests of the company as a whole. 3. An independent director does not take part in the management of the company, any of its subsidiaries, an affiliated company or anyone who may have a conflict of interest with the company, nor is he/she an employee, staff member, or advisor receiving a regular salary from the company, or a person with control over such company. He/she shall not have a conflict of interest or any of the above for at least one year. 4. An independent director does not have any business relationship, directly or indirectly, in the finance and management of the company, any of its subsidiaries, an affiliated company or with anyone who may have a conflict of interest, in such a way that might affect his/her independence.
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Eastern Water Resources Development and Management Plc.