Vision To be a leader in valued water management for sustainable economic and social progress under the concept of Water Solution of All.
Mission • • • • • •
To maintain integrated business growth with transparency To serve as a regional water technology center To allocate water sources and manage raw water pipelines networks for adequate consumption and industrial use To develop and manage waterworks systems, water reuse systems, and waste water treatment systems by using appropriate technology and at reasonable cost To operate business with corporate social responsibility To instill pride as a leader in water management among employees
Strategies: To implement harmonized strategies covering four main elements, i.e. finance and investment, stakeholders, management, and knowledge and organization and technology development. 1. Finance and investment 1.1 Increasing main income and developing downstream business 1.2 Implementing appropriate cost control 1.3 Performing financial management to accommodate investment 1.4 Developing related and other businesses 1.5 Developing overseas businesses and forming alliance with overseas partners 1.6 Formulating a policy for raw water pricing to correspond with the cost 2. Stakeholders 2.1 Giving stakeholders satisfaction 2.2 Promoting the Company s image
3. Management 3.1 Allocating water sources and reserved water sources 3.2 Increasing volume of water sold 3.3 Adhering to good corporate governance 3.4 Managing assets with maximum efficiency and effectiveness 4. Knowledge and Organization and Technology Development 4.1 Developing knowledge and competency, promoting employees career advancement, and offering appropriate compensation 4.2 Promoting quality of life and good workplace environment 4.3 Developing integrated enterprise system development 4.4 Maintaining stability and efficiency of computer systems and networks
Contents Highlights
2
Message from the Chairman
3
Board of Directors and Advisor to the Board of Directors
4
Management Team
6
Organization Structure
8
Business Profile and Subsidiary Shareholding Structure
9
Industrial Situation and Competition
12
Risk Factors (October – December 2008)
14
Management Discussion and Analysis Eastern Water Resources Development and Management PLC.
17
Good Corporate Governance
23
Definition of Independent Director
33
2008 Assessment of Adequacy of Internal Control Systems
34
Report of the Audit Committee for the Three-month Period (1 October 2008 – 31 December 2008)
37
Good Corporate Governance
39
Report on the Board of Directors’ Responsibility towards the Financial Statements
40
Report of Independent Auditor
41
Balance Sheets
42
Notes to financial statements
50
Related Party Transactions / Auditor’s Fee
110
General Information
111
First 10 Major Shareholders as of 7 January 2009
113
Dividend Payment Policy
114
Connected Transactions
115
Activities in 2008
116
Highlights Water Distribution Capacity and Raw Water Consumption during 2001-2008 Unit : Million Cubic Meters/Year
2001
Total water consumption Water distribution capacity Water distribution capacity to water consumption ratio (Unit : Times)
2002
2003
116.10 140.03 156.52 263.00 328.00 328.00 2.27
2.34
2.10
2004
2005
2006
177.65 190.10 199.36 343.00 423.00 423.00 1.93
2.23
2.12
2007
2008
Oct-Dec 08
211.20 227.69 51.86 473.00 473.00 473.00 2.24
2.08
2.28
Financial Ratios
Description Book value per share (Baht/share) Net profit per share (Baht/share) Dividend per share (Baht/share) Net profit to total income (%) Return on shareholders equity (%) Return on assets (%) Debt to equity ratios (Times)
Company Financial 3 Consolidated 3 Statement Months Financial Statement 3 Months 2005 2006 2007 2008 Oct-Dec 08 2006 2007 2008 Oct-Dec 08 3.16 3.31 3.35 3.47 3.54 3.33 3.50 3.59 3.68 0.39 0.39 0.33 0.32 0.08 0.39 0.33 0.39 0.09 0.25 0.25 0.25 0.25 0.25 0.25 0.25 35.40 33.00 22.98 25.30 25.10 21.50 18.13 22.02 23.05 12.41 12.04 9.58 10.09 8.68 11.92 9.36 10.05 9.67 6.99 5.96 4.86 6.09 6.24 5.48 4.49 5.60 6.26 0.88 1.01 0.97 0.52 0.48 1.20 1.09 0.56 0.53
2004 3.55 0.44 0.20 31.79 12.55 6.78 0.85
Comparison of Total Income and Net Profit (2006-2008)
Million/Baht
Oct - Dec 2008 Total income = 634.31 Million Baht
Net profit = 146.19 Million Baht
2006
2007
2008
Oct-Dec 2008
Other Sources of income
Other revenues Pipe business Drinking water business Revenue from services Tap water business Raw water business 2003
2
2004
Annual Report 2008 (October - December 2008)
2005
2006
2007
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2008
Oct-Dec 2008
Message from the Chairman In the past two years several changes took place in the Company. These changes, with emphasis on stabilizing and continuously enhancing the growth of the Company, include the creation of a comprehensive pipeline network, the formulation of plans to acquire water sources to meet the increasing demand for water, and the support for greater internal management efficiency. This is not to mention the activities to strengthen the relationships with stakeholders, develop skills and competency of personnel, and revise the Company s financial policy to be more reliable and in conformity to international practice. Pursuing the said policy, in 2008 the Company changed its accounting period to be based on the calendar year, commencing on 1 January 2009. The change was approved by the 2007 Ordinary General Meeting of Shareholders held on 24 January 2008. The purpose of the new accounting period was that the Company s finance and performance would be easier to understand, could be compared with other listed companies, and could be communicated to outsiders by using the same standard. As a result, the Company is now presenting the annual reports for the period of 1 October 31 December 2008, which is in the fiscal year 2008 (1 October 2007 - 30 September 2008) and for the accounting year 2009 (1 January -31 December 2009). Although the Company performance during the 1 October 2008 31 December 2008 accounting period was satisfactory, the Company remains unconcerned with the looming economic problems and had been monitoring and preparing for the likely impact. Action taken includes reduction of the selling and administrative expenses and the operating cost. Precaution measures are also taken against upcoming investment, with due consideration given to the interests of all stakeholders. On behalf of the Board of Directors of Eastern Water Resources Development & Management PLC, I would like to extend my sincere thanks to shareholders, customers, and business partners in the public and private sectors for their continued support and confidence in East Water. I also would like to express my appreciation to the management and all employees for their determination and concerted effort that enabled the Company to achieve its goals and mission even in the face of global economic crisis. The Company will continue to operate its business by relying on the principle of good governance for sustainable stability and growth in the future.
Mr. Utid Tamwatin Chairman
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Annual Report 2008 (October - December 2008)
3
Board of Directors and Advisor to the Board of Directors
11
8
9
2
3
10
1
4
6
1. Mr. Utid Tamwatin
3. Pol. Gen. Ajiravid Subarnbhesaj
Position Education
Position
Age 59 Chairman (Independent Director) Master of Law, University of California, Berkeley, USA. DCP 3/2000
Education
Work Experience MAY 08 - Present MAY 07 - APR 08 JAN 03 - JAN 07
Chairman Director Director Eastern Water Resources Development and Management PLC. OCT 08 - Present Director - General The Customs Department DEC 03 - Present Director Sukhumvit Asset Management Co., Ltd. Feb 09 - Present Director Airports of Thailand PLC. Mar 08 - Jan 09 Deputy Permanent Secretary NOV 06 - SEP 08 Ministry of Finance OCT 04 - OCT 06 Director - General The Excise Department
Work Experience MAY 08 - Present OCT 06 - MAR 07 OCT 05 - SEP 06 OCT 02 - SEP 05
Position
Education
Position
Age 52 Director (1) Chairman of the Executive and Invesment Committee (2) Member of the Remuneration Committee Master of Public Administration (Public Policy and Human Resource Management) Sripatum University DCP 106/2008 DAP 73/2008
Work Experience MAY 08 - Present Director Eastern Water Resources Development and Management PLC. Present Director Ekarat Engineering PLC. Annual Report 2008 (October - December 2008)
12
7
Age 62 Director (Independent Director) (1) Chairman of the Audit Committee (2) Member of the Remuneration Committee Master of Public Administration National Institute of Development Administration (NIDA) DCP 104/2008 DAP 72/2008 ACP 22/2008
Director Eastern Water Resources Development and Management PLC. Deputy Commissioner General (Administration) Assistant Commissioner-General Commissioner of Police Region 4
4. Pol.Lt. Gen. Somyot Poompanmoung
2. Mr. Kanoksakdi Bhinsaeng
4
5
Education Work Experience MAY 08 - Present
Age 54 Director (1) Chairman of the Evaluation Committee (2) Member of the Executive and Invesment Committee (3) Member of the Risk Management Committee Master of Political Science Puna University, India DCP 107/2008 FSD 2/2008
Director Eastern Water Resources Development and Management PLC. APR 08 - Present Director The Provincial Waterworks Authority OCT 08 - Present Assistant Commissioner General JUN 08 - SEP 08 Commissioner, Central Investigation Bureau FEB 08 -MAY08 Commissioner of the Office of Inspector, General
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5. Pol. Maj. Gen. Pimol Sinthunava
9. Mr. Rasda Pongpaew
Position
Position
Education
Age 67 Director (Independent Director) (1) Chairman of the Nominating Committee (2) Member of the Audit Committee (3) Member of the Corporate Governance Committee Master of Education in Education Program Administration, Naresuan University DCP 104/2008 DAP 72/2008 ACP 22/2008
Work Experience MAY 08 - Present
Director Eastern Water Resources Development and Management PLC. OCT 99 - NOV 01 Assistant Commissioner Provincial Police Region 6, Phitsanulok Province
6. Mr. Chakarn Saengruksawong Position Education
Age 58 Director (1) Member of the Risk Management Committee (2) Member of the Nominating Committee Master of Science (Agricultural Extension), Kasetsart University
Education Work Experience MAY08 - Present
Director Eastern Water Resources Development and Management PLC. MAR 06 - Present Managing Director EGCO Engineering and Service Co.,Ltd. SEP 98 - MAR 06 Deputy Managing Director EGCO Engineering and Service Co.,Ltd.
10. Mr. Chanchai Tontisirin Position Education
Work Experience MAY 08 - JAN 09
Director Eastern Water Resources Development and Management PLC. APR 08 - Present Director The Provincial Waterworks Authority OCT 05 - Present Deputy Permanent Secretary Ministry of Agriculture and Cooperatives OCT 02 - SEP 05 Director - General Depertment of Agriculture Ministry of Agriculture and Cooperatives
7. Mr. Nattachak Pattamasingh Na Ayuthaya Position
Education
Work Experience MAY 08 - Present APR 08 - Present Present MAR 06 - Present
Age 55 Director (1) Chairman of the Remuneration Committee (2) Member of the Nominating Committee (3) Member of the Evaluation Committee (1) Master of Comparative Law, George Washington University, USA. (2) Master of Law, University of Pennsylvania, USA. DCP 70/2006 ACP 13/2006
Director Eastern Water Resources Development and Management PLC. Director The Provincial Waterworks Authority Director Bangkok Aviation Fuel Services PLC. Deputy Director - General Department of Legal Counsel, Office of The Attorney General
8. Mrs. Monta Pranootnorapal Position
Education
Work Experience MAY 08 - Present MAY 08 - Present OCT 04 - DEC 07
Age 54 Director (1) Chairperson of the Risk Management Committee (2) Member of the Evaluation Committee Master of Public Administration National Institute of Development Administration (NIDA) DCP 84 / 2007
Director Eastern Water Resources Development and Management PLC. Director and Governor Industrial Estate Authority of Thailand Deputy Governor 11 ( Industrial Port ) Industrial Estate Authority of Thailand
Age 58 Director (1) Member of the Corporate Governance Committee (2) Member of the Evaluation Committee Bachelor of Science ( Mech. Eng ) Prince of Songkla University DCP 94/2007
Work Experience MAY 08 - Present JAN 05 - DEC 06 JAN 05 - DEC 06 JAN 88 - DEC 02
Age 66 Director (Independent Director) (1) Member of the Audit committee (2) Member of the Risk Management Committee Master Degree in Economic, Middle Tennessee State University, USA. DCP 1/2008 (Refresher Course) ACP 22/2008
Director Eastern Water Resources Development and Management PLC. Deputy Chairman The Marketing Organization Chairman Bangpakong Water Supply Co.,Ltd. Regional Manager TMB Bank PLC.
11. Mr. Praphant Asava-aree Position
Education Work Experience MAY 08 - Present JAN 07 - JAN 08 APR 07 - Present MAR 07 - Present APR 07 - Present
Age 52 Director (1) Member of the Executive and Invesment Committee (2) Member of the Risk Management Committee Bachelor s Degree (Political Science) Ramkamhaeng University DCP 101/2008 ACP 21/2007
Director Director Eastern Water Resources Development and Management PLC. President & CEO Eastern Water Resources Development and Management PLC . Director Universal Utilities Co.,Ltd. Director, member of the Audit Committee and Corporate Governance Committee Seamico Securities PLC.
12. Lt. Gen Chayuth Suwanamas Position Education
Age 56 Advisor M.A. Industrial Psychology Tennesses State University, USA.
Work Experience MAY 08 - Present
Advisor Eastern Water Resources Development and Management PLC. APR 03 - Present Policy and Plan Attached to Deputy Supreme Commander Office of Supreme Command Present Advisor CPB Equity Company Limited., Crown Property Bureau JAN 07 - MAY 08 Director Eastern Water Resources Development and Management PLC.
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Annual Report 2008 (October - December 2008)
5
Management Team
8
9
3
2
4
6
7
10
1. Mr. Praphant Asava-aree
3. Mrs. Namphon Rassadanukul
Position : Education :
Position :
Age 52 Director, President & CEO B.A. in Political Science, Ramkhanhaeng University Directors Certification Program (DCP 101/2008 ACP 21/2007)
Education :
5
Age 48 Senior Vice President (Dept. of CEO Office and Corporate Secretary) M.A. (Public Administration for Developing Countries), Glasgow College of Technology, UK. Directors Certification Program (DCP 4/2000)
Work Experience: May 08 Present Director Jan 07 Jan 08 Director Eastern Water Resources Development& Management PLC. Apr 07 Present President & CEO Eastern Water Resources Development & Management PLC. Mar 07 Present Director Universal Utilities Co., Ltd. Apr 07 Present Director, Member of Audit and Good Corporate Governance Committees Seamico Securities PLC. Jun 05 Present Advisor to the Deputy Governor The Tourism Authority of Thailand (China Market)
Work Experience : Jun 07 Present Senior Vice President (Dept. of CEO Office and Corporate Secretary) Eastern Water Resources Development & Management PLC. Feb 04 Jun 07 Senior Vice President, Internal Audit Department and Corporate Secretary Eastern Water Resources Development & Management PLC. Nov 01 Feb 04 Vice President Internal Audit Department Eastern Water Resources Development & Management PLC. Mar 01 Oct 01 Vice President (Dept. of CEO Office) Eastern Water Resources Development & Management PLC.
2. Mr. Pairoj Sattayasansakul
4. Mrs. Thidarut Kraiprasit
Position :
Position :
Education :
Age 49 Executive Vice President (Dept. of CEO Office) M. Eng.(Sanitary Engineering), Chulalongkorn University Directors Certification Program (DCP 19/2002)
Work Experience : Aug 08 Present Executive Vice President (Dept. of CEO Office) Eastern Water Resources Development& Management PLC. Nov 01 Jul 08 Executive Vice President, Planning & Operations Eastern Water Resources Development& Management PLC. 2001 Jul 08 Director/Managing Director Universal Utilities Co., Ltd. 2001 Jul 08 Director Bangpakong Water Supply Co., Ltd. 2001 Jul 08 Director Chachoengsao Water Supply Co., Ltd. 2001 Jul 08 Director Nakornsawan Water Supply Co., Ltd. 6
1
Annual Report 2008 (October - December 2008)
Age 45 Senior Vice President (Finance and Accounting Department) MBA, Kasetsart University
Education : Work Experience : Jun 07 Present Senior Vice President, Finance and Accounting Department Eastern Water Resources Development & Management PLC. Oct 04 Jun 07 Senior Vice President, Finance and Human Resources Department Eastern Water Resources Development & Management PLC. 2001 Oct 04 Vice President, Finance and Human Resources Department Eastern Water Resources Development & Management PLC. 2540 - 2544 Vice President, Finance and Procurement Department Eastern Water Resources Development & Management PLC.
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5. Mr. Cherdchai Pitiwacharakul Position : Education :
Age 44 Vice President (Business Development Department) MS (Information Technology), King Mongkut s Institute of Technology, Lat Krabang
Work Experience : Dec 08 Present Vice President, Business Development Department Eastern Water Resources Development & Management PLC. Aug 08 Present Acting Managing Director Universal Utilities Co., Ltd. Jul 08 Present Director Universal Utilities Co., Ltd. Mar 08 Present Director Egcom Tara Co., Ltd. Nov 07 Nov 08 Vice President, Special Project Department Eastern Water Resources Development & Management PLC. Mar 07 Present Director Bangpakong Water Supply Co., Ltd. Director Chachoengsao Water Supply Co., Ltd. Director Nakornsawan Water Supply Co., Ltd. Nov 01 Nov 07 Vice President, Chachoengsao Operation Center, Acting Vice President, Rayong Operation Center Eastern Water Resources Development & Management PLC. Oct 00 Oct 01 Vice President, Map Ta Phut Operation Center Eastern Water Resources Development & Management PLC.
6. Mr. Potjana Bunsiri Age 47 Position : Vice President, (Operation Department) Education : MBA, Burapha University Work Experience : Nov 07 Present Vice President, Operations Department Eastern Water Resources Development & Management PLC. Nov 01 Oct 07 Vice President, Chachoengsao Operation Center Eastern Water Resources Development & Management PLC. Mar 01 Oct 01 Manager, Chachoengsao Construction Project Office Eastern Water Resources Development & Management PLC. Mar 01 Oct 01 Manager, Large-scale Construction Project Office Eastern Water Resources Development & Management PLC. 1998 2001 Senior Engineer Eastern Water Resources Development & Management PLC. 7. Ms. Fuangfa Nimcharoen
Age 44 Vice President (Information Technology Department) M. Sc. in (Resource Economics), Kasetsart University
Position : Education : Work Experience : Jun 07 Present Vice President, Information Technology Department Eastern Water Resources Development & Management PLC. Nov 02 Jun 07 Vice President, Corporate Affairs Department Eastern Water Resources Development & Management PLC. Nov 01 Oct 02 Acting Vice President, Corporate Affairs Department Eastern Water Resources Development & Management PLC. Mar 01 Oct 01 Assistant Vice President, Administration Eastern Water Resources Development & Management PLC.
8. Mr. Namsak Wannavisute
Age 43 Position : Vice President (General Affairs Department) Education : MS. (Finance), University of Colorado, USA. Work Experience : Jun 07 Present Vice President, General Affairs Department Eastern Water Resources Development & Management PLC. Nov 02 Jun 07 Vice President, Business Development Department Eastern Water Resources Development & Management PLC. Nov 01 Oct 01 Acting Vice President, Business Development Department Eastern Water Resources Development & Management PLC. Mar 01 Oct 01 Manager, Business Development Department Eastern Water Resources Development & Management PLC.
9. Mr. Jaroensuk Worapansopak Position : Education :
Age 45 Vice President (Project Planning Department) M.Sc. (Hydraulic Engineering), International Institute for Hydraulic and Environmental Engineering (IHE) Delft, The Netherlands.
Work Experience : Aug 08 Present Director Egcom Tara Co., Ltd. Nov 02 Present Vice President, Project Planning Department Eastern Water Resources Development & Management PLC. Nov 01 Oct 02 Acting Vice President, Project Planning Department Eastern Water Resources Development & Management PLC. Mar 01 Oct 01 Manager, Project Planning Department Eastern Water Resources Development & Management PLC.
10. Mrs. Wirawan Tharanont Position : Education :
Age 50 Vice President (Internal Audit Department) MBA, Sasin Graduate Institute of Business Administration of Chulalongkorn University
Work Experience : Jun 07 Present Vice President, Internal Audit Department Eastern Water Resources Development & Management PLC. Oct 06 Jun 07 Vice President, Department of CEO Office Eastern Water Resources Development & Management PLC. Oct 05 Sep 06 Manager, Department of CEO Office Eastern Water Resources Development & Management PLC. 2004 2005 Corporate Risk Manager Eastern Water Resources Development & Management PLC.
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Annual Report 2008 (October - December 2008)
7
Organization Structure Eastern Water Resources Development & Management PLC. Approved by a resolution of the Board of Directors No. 20/2551 on 22 December 2008
Board of Directors
Risk Management Committee
Audit Committee
Good Governance Committee
Management and Investment Committee
Nomination Committee
Remuneration Committee
Performance Criteria and Evaluation Committee
President & CEO
Internal Audit Department
Vice President Planning & Operations
Marketing Communication Department
Operations Department
8
CEO Office
Vice President Administration
Information Technology Department
Vice President Finance
Business Development Department
Finance and Accounting Department
Project Planning
Annual Report 2008 (October - December 2008)
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Vice President Corporate Affairs
Corporate Affairs Department
Human Resource Department
Business Profile and Subsidiary Shareholding Structure
Core Business Eastern Water Resources Development and Management Public Company Limited was founded on October 15, 1992 to be responsible for the development and management of main water pipeline systems in the Eastern Seaboard. The Company supplies raw water to industrial estates, factories and waterworks via four main raw water pipeline systems in Chonburi, Rayong and Chachoengsao Province, i.e. the Nong Plalai-Dokkrai-Map Ta Phut-Sattahip pipeline; the Nong Kho-Laem Chabang-Pattaya-Bang Phra Pipeline; the Nong Plalai-Nong Kho Pipeline; and the pipeline system in Chachoengsao. At the time of this reporting the Company manages 324 km water pipelines with the combined pumping capacity of 478 million cubic meters per year. Major Development of Core Business Core Business October 2006: Began construction of the reserved raw water reservoir and associated pipeline for connecting the reserved reservoir to the Bangpakong - Bang Phra - Chonburi pipeline. The new 700 mm. diameter pipeline, covers a distance of approximately 2.2 kms., was laid to connect the reserved raw water reservoir at the Samnak Bok Subdristrict Administration Organizatation. The reserved reservoir has a holding capacity of 7.4 million m.3. It will be used to store water from the Bang Pa Kong River during the rainy season and distribute to areas in Chachoengsao and Chonburi Provinces during the dry season. The construction had been completed on October 29, 2007. May 2007: A consulting company was hired to conduct a study on the improvement of main pipeline system project in the Eastern Seaboard Area. The objective of the study was to formulate a master plan for the main pipeline system improvement to ensure adequate capacity to accommodate the increase in demand for water in the next ten years. At present, the detailed design is in progress and the work procurement process is expected to start in May 2009.
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Annual Report 2008 (October - December 2008)
9
September 2007:
The construction of the pipeline connecting Prasae Reservoir and Klong Yai Reservoir under the Royal Irrigation Department in accordance with a cabinet resolution of August 2, 2005 is in progress. These 1,600 mm. diameter and 1,400 mm. diameter pipes were laid covering a distance of 31.8 kilometers. The objective of the pipeline is to channel water approximately 80 million cubic meters per year from Prasae Reservoir to Khlong Yai Reservoir. About 98% of the 1,700 million Baht project had been completed and the remaining work of the pumping system was expected to be ready for operation in 2009.
Related Businesses Tap Water Business: Universal Utilities Co., Ltd. (UU) is a concessionaire offering tap water services in nine areas; including, Sattahip Waterworks, Bangpakong Waterworks, Chachoengsao Waterworks, Nakornsawan Waterworks, Sichang Waterworks, Bo Win Waterworks, Ko Samui Waterworks, Ko Lan Waterworks, and Rayong Waterworks. In addition, it produced tap water for Egcom Tara Co., Ltd. and Ratchaburi-Samut Songkram Waterworks. UU also managed water leakage reduction systems for Service Area 2 of Om Noi - Samphran - Samut Songkhram Waterworks, Pathumthani - Rangsit Waterworks, and Pattaya Waterworks. Important Developments in Tap Water Business February 2008: Universal Utilities Co., Ltd. signed an agreement with the Provincial Waterworks Authority on 18 February 2008. This was a two-year Water Loss Reduction Agreement for areas under the Om Noi Samphran -Samut Songkhram Waterworks, involving a budget of 98.38 million Baht. June 2008: Universal Utilities Co., Ltd. signed an agreement with the Provincial Waterworks Authority. This was a 14month Water Loss Reduction Agreement for areas under the Pattaya Waterworks, involving a budget of 11.20 million Baht.
10
Annual Report 2008 (October - December 2008)
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September 2008: Universal Utilities Co., Ltd. signed an agreement with the Provincial Waterworks Authority. This was a 5-year Non-Revenue Water Project for areas under the Pathumthani - Rangsit Waterworks. Universal Utilities Co., Ltd. signed an agreement with the Provincial Waterworks Authority on 24 September 2008. This is an agreement to engage a private entity to manage tap water production and waterworks system maintenance at the Bang Niaw Dam Water Treatment Plant, Phuket Waterworks. The term of the agreement is three years and the required production capacity is12,000 m.3/day.
Drinking Water Vending Machine Business: Water Trades and Services Co., Ltd. took over the business from Global Water Systems Corporation (GWS) to continue providing support and service for the community drinking water vending machine and assisting in the service related to selling existing vending machines that GWS had transferred to East Water.
Administration and Management June 2008: The Company was rated Very Good in the Evaluation of Quality in Organizing Annual Ordinary General Shareholders Meetings as indicated in the SEC s letter, Reference Number Kor. Lor. Tor. Kor. 1028/2008, Re: Notification of the result of the 2007 Evaluation of Quality in Organizing Annual Ordinary Shareholders Meeting Quality for companies not closing accounts in December 2007 and its request for cooperation in disclosure of the result. The project was jointly implemented by the Securities and Exchange Commission, the Thai Investors Association, and the Thai Listed Companies Association. November 2008: The Company was rated Very Good in the category of Corporate Governance during the 2008 SET Awards Presentation on 21 November 2008. The event was jointly organized by the Stock Exchange of Thailand and the Journal of Finance and Banking.
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Annual Report 2008 (October - December 2008)
11
Industrial Situation and Competition The Thai economy in 2008 showed a growth rate of 4.5% comparing 4.8% in 2007. The political conflicts that were accelerated during the second half of the year had a negative impact on the market confidence in Thailand and tourism industry. At the same time, the financial crisis in the United States intensified and spread to leading industrial countries, all of which are Thailand s main export markets. As a result, export during the last quarter (October-December 2008) slowed down substantially. The crises caused the cutback or production stoppage of some factories in automotive and petroleum industries, and this led to lower water consumption. The iron and steel industry also reduced its production because of the decrease in market demand. As a result, the raw water consumption of the industrial sector in major industrial estates dropped accordingly. For examples, in Map Ta Phut Industrial Estate, Laem Chabang Industrial Estate and the Hemaraj Group, which are the production base of petrochemicals and automotive parts, raw water consumption dropped drastically. Nevertheless, the rate of household water consumption declined only slightly when compared to the same period of the previous year. The overall decrease in raw water consumption was 6.88% when compared to the previous year. Although the anticipated global economic slowdown in 2009 caused by the demand decrease in the global market last year, it is expected that the government economic stimulus policy will be favorable to the country s tourist industry. Tourism industry shows a sign of early recovery when compared to the petrochemical and other production industries for export. Based on this trend together with the 2009 GDP forecast of 2.0 to 2.5%, the Company anticipates that the total raw water consumption may be approximately the same or slightly higher than that of the previous year. An important positive factor is the production capacity expansion of several waterworks, such as the Bang Chang Waterworks and Pattaya Waterworks, to meet the increased demand in water for household consumption. Another positive aspect is the commencement of Phase 3 of the petrochemical business. To cope with the 2009 economy condition, the Company has a plan to closely monitor water consumption situation in line with fluctuating economic conditions. The Company is confident that the government s economic stimulus package will create a clear direction of the country s economy and the confidence in the global market. This is turn with lead to a quick recovery of the production for export sector and eventually the demand for raw water will increase accordingly Raw Water Consumption during October-December 2008 Plants and others Private Industrial Estates
8.17% 20.34%
32.72% Domestic consumption
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Annual Report 2008 (October - December 2008)
38.77%
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IEAT and existing users
Water Volume (million cubic meters)
Comparison of Raw Water Consumption During October-December 2008
Oct-Dec 2007
Oct-Dec 2008
Tap Water Business Revenue from the tap water business accounted for 23% of the total income. Revenue from sales and service of tap water was only slightly affected by the economic conditions because most of the revenue was from concession contracts with affiliated companies of the Provincial Waterworks Authority (PWA) or with local administration organizations; and some of these contracts had a minimum purchase condition. Moreover, tap water is essential for life. Thus, the volume of water consumption was not greatly affected by economic problems. Also, water for household consumption continued to increase, both in the number of users and service areas. During October-December 2008, sales of tap water enjoyed an overall growth rate of 7.4% when compared to the same period in 2007. Futhermore, the Company is in the process of negotiating with the Provincial Waterworks Authority (PWA) regarding the investment in the tap water system of 24,000 cubic meters per day, supplied to PWA in Chon Buri Province, and the increase in the volume sold to PWA on Samui Island from 2,500 cubic meters per day to 6,000 cubic meters per day. This is not to mention other areas where water shortage still exists - the factor that will contribute to the increase in the Company s service areas and sales of tap water. In addition, the Company plans to conduct a study on investment in tap water service for other potential groups of users, i.e. local administration organizations and users in the industrial sector as well as on investment in water loss management and waste water treatment projects.
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Annual Report 2008 (October - December 2008)
13
Risk Factors (October – December 2008) The Board of Directors realizes the importance of good governance and is committed to the development of good corporate governance, which includes suitable risk management to mitigate the negative impact of incidents or uncertainty that may be caused by circumstantial factors, including the economic recession that may impair the Company s ability to accomplish its objectives or goals. Thus, the Risk Management Committee was assigned to formulate policies and monitor corporate risks. Improvement has been made on the framework and criteria based on the affecting factors. A risk management guideline has been prepared and progress has been monitored based on the operational plans for risk management prepared by the Company and responsible work units to ensure consistent control of risks, with results to be reported to the Board of Directors on a quarterly basis. Key risk factors that may significantly affect to business operations; 1. Business-related Risks 1.1 Conflicts with communities concerning the use of water resources Most of the construction projects are major pipeline projects, such as Prasae to Khlong Yai which will be one of the Company s main raw water resources. Their implementation and the use of water resources in the Company s projects may cause conflicts with communities in the area. However, the Company has coordinated with the local communities and tried to have dialogues to end the conflict in each community. During October December 2008, there were activities organized jointly with the communities such the digging and cleaning up of canals, and the presentation of reversed osmoses (RO) drinking the water vending machines and clean water storage tanks to the communities. Other activities included the Water and Environmental Conservation Camp for Young Leaders and the award of scholarships to students. In addition the Company also commissioned the Asian Institute of Technology (AIT) to conduct a study to address of the impact of the Company s water pumping activities on the change in water levels in areas in Prachinburi Province. The study also included other issues such as the problem and the cause of the collapse of the Prachinburi River s banks. It also explored the hydraulic and water level aspect to determine, river s flow rate that would maintain the salinity level at the pumping station of no more than 200 ppm, the threshold value where water pumping must stop. This was because at the end of 2007, there was news that the method the Company had pumped water from the Bang Pa Kong River was the cause of the collapse of the river banks in Prachinburi Province and the unusual increase in the salinity level of the Bang Pa Kong River. Findings from the study conducted by AIT showed that the Company s pumping activities were not the cause of such salinity level or the collapse of the river banks. The study documents can serve as a scientific proof that can be used as an explanation should there be any conflicts with these communities in the future.
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Annual Report 2008 (October - December 2008)
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1.2 Inadequacy of water resources to meet water consumption demand The projection of the volume of water in main water resources indicated that there would be sufficient water for consumption throughout 2008. However, to mitigate against this risk, the Company implemented a monitoring system to be detect warning on the alert for droughts. Preventive measures were put in place and the water situation was monitored on a weekly basis. A project to increase raw water capacity was implemented, with the provision of earth pits to restore water to be used during the dry season. At the time of this reporting, the water volume in the main reservoirs was 194.2 million cubic meters, or at 82.6% of the total capacity (235.2 million cubic meters as of 2 February 2009). 1.3 Policies of the government and relevant government agencies With the increase in the private sector s shareholding, the Company was no longer a state enterprise. Thus the uncertainty in the policies of government agencies involved in the Company s operations may have some repercussion on the Company. For example, there might be a risk of not getting approval for allocation of 80 million cubic meters/year from the Prasae Reservoir from the Royal Irrigation Department. The matter was under the consideration of Office of Hydrology and Water Management, Royal Irrigation Department. Also, the Department of Highways and local administration organizations might decide not to award or renew permits for pipeline laying in areas under their jurisdiction. Nevertheless, the Company has always received good cooperation from relevant government agencies. Moreover, the Company was incorporated, and has been operating its business, according to a cabinet resolution in line with the government policy to promote investment in industry and tourism in the Eastern Seaboard. 1.4 Damage to pipeline systems The Company s pipeline systems may face the problem of corrosion, or construction of other infrastructure in the areas where the pipelines are laid, that may lead to breaking or leaking. However, the Company has prepared a plan to inspect and maintain the pipeline systems on a continuous basis. The Company has also taken all risks insurance to cover every pipeline as well as insurance to cover risks to its assets and liabilities to third parties to ensure that water would be distributed efficiently and without interruption. 2. Financial Risks Pumping water from newly developed water resources and the rising cost of energy due to a higher Ft rate resulted in higher cost of energy used for water pumping than anticipated. Although the Company could not control the cost of energy, which varied with the economy and price of oil in the global market; but it was able to manage by such measures as pumping water during the time that the cost was at the lowest and improving the pumps efficiency. The Company has also prepared an energy conservation plan, explored alternative energy sources such as hydro, solar and wind energies. At present the unstable economy has caused multiple problems, such as those related to foreign exchange rates, economic crisis, and financial problems. This has changed water users behavior, especially in the industrial sector where water consumption has declined and investment has slowed down.
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Annual Report 2008 (October - December 2008)
15
3.
Legal Risks Legal disputes that might affect the assets of the Company in the value exceeding 5% of shareholders equity as of 31 December 2008 are listed below. 1. On 28 March 2003, the Company was the 2nd Defendant in a case involving the purchase of assets from the Legal Execution Department, Black Case No. 1371/2546. Droitnes Associate Company Limited (Plaintiff) filed a case in the Court demanding revocation of the legal act, i.e. the buying and selling of land, between the Legal Execution Department and the Company, or that the Department and the Company jointly, or on behalf of the other party, pay them damages, at the claimed amount of 302.2 million Baht. On 26 January 2006, the Court of First Instance dismissed the case. The Plaintiff lodged an appeal on 21 March 2006. The Company filed the answer to the appeal on 19 June 2006 and the proceedings are still ongoing at the Court of Appeals at the time of this reporting. However, the Company believed that such transaction was legitimate and protected by law. The Company followed the procedures for sale by auction in good faith according to the Court s order or the order of the Official Receiver. Full payment was made and the transfer of ownership from the Legal Execution Department was duly registered. The Company expects to win this case. 2. Tambon Bang But Administration Organization, 1st Plaintiff, Tambon Ban Khai Administration Organization, nd 2 Plaintiff, and Mr. Sayan Yangdee, 3rd Plaintiff filed a case against the Provincial Waterworks Authority (PWA) at the Rayong Administrative Court on 14 March 2006. The case concerned an unlawful act committed by an administrative agency or a state official. Afterwards, on 30 May 2006, the Rayong Administrative Court summoned the UU Group Consortium to be the interpleaded and prepare the statement in its capacity as the 2nd Defendant, because it was an interested party in this dispute. On 16 March 2007, the Rayong Administrative Court passed a decision to revoke the process to select a private entity to produce tap water to sell to PWA in the area under the jurisdiction of the Rayong Waterworks Authority. The Agreement No. For. Kor. Mor. 1/2549 dated 14 March 2006, which resulted from an unlawful selection process, was also revoked. However, PWA still instructed the UU Group Consortium to comply with the agreement for a private entity to produce water to sell to PWA at the Rayong Waterworks Authority. PWA also upheld the rights and duties of the Parties to the Agreement as stipulated in the said Agreement until the case would become final. If the Supreme Administrative Court should confirm the decision of the Rayong Administrative Court, thus reinstating the parties to their original status, the UU Group Consortium would then have the right to claim damages from PWA, which would include the construction cost, the system improvement cost and any other expenditure incurred to make the tap water systems operable. At the time of this reporting, the appeal proceedings were in process at the Supreme Administrative Court. Although corporate risks are closely monitored by the Risk Management Committee, the Company has prepared a risk management guidance and 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 every quarters and not limited to those relating to damage. The review also includes consideration of other parameters tat can indicate probable risks under changing situations.
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Annual Report 2008 (October - December 2008)
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Management Discussion and Analysis Eastern Water Resources Development and Management PLC. In the 2007 Ordinary General Meeting of Shareholders held on 24 January 2008, a resolution was passed to change the Company s accounting period from 1 October to 30 September of the following year to the period of to 1 January to 31 December of every year. This new accounting period took effect from the accounting year commencing on 1 January 2009, in order to be based on the calendar year and consistent with the practice of other listed companies. As a result, in 2008 the Company had to close its account twice, i.e. for the October 2007 - September 2008 and the October 2008 - December 2008 periods. In that respect the management prepare financial analysis for the period of 1 October - 31 December 2008 and compares the financial statements of the Company and its subsidiaries with the same period of the previous year, i.e. 1 October 2007 - 31 December 2007. Details of the financial statement between 1 October 2007 - 31 December 2007 are given below. 1. Performance Report and Analysis 1.1 Income analysis During the 1 October 2008 - 31 December 2008 accounting period, the total revenue of the Company and its subsidiaries was 634.31 million Baht, an increase of 64.35 million Baht, or 11.29%, compared to the same period in 2007 (1 October 2007 - 31 December 2007). Important details are given below: Unit: Million Baht Revenue
Oct-Dec 2008
Oct-Dec 2007
Difference
Raw water
393.11
407.78
(14.66)
(3.60%)
Tap water
144.74
125.42
19.32
15.40%
0.20
7.98
(7.79)
(97.56%)
Revenue from services
73.44
24.69
48.75
197.46%
Interest income/dividend income
19.76
1.50
18.26
1,221.40%
3.06
2.60
0.46
17.80%
634.31
569.96
64.35
11.29%
Other revenues from sales
Others Total income
-
Difference (%)
Revenue from sales of raw water decreased from 407.78 million Baht to 393.11 million Baht or 3.60%, consistent with the decrease in the amount of raw water sold in all areas, which dropped from 55.69 million cubic meters to 51.86 million cubic meters, or 6.88% due to the production plan adjustment in the industrial sector to correspond with the sluggish economy. Income from the tap water business increased by 19.32 million Baht or 15.40%, due to an increase in the number of new customers and in water consumption of the existing users under the Sattahip Waterworks and waterworks under concessions in three other areas. The figures also include income from sales of tap water to Pattaya and revenue from waterworks under concession, i.e., BACK TO CONTENT
Annual Report 2008 (October - December 2008)
17
Sichang Waterworks, Koh Samui Waterworks, Koh Lan Waterworks and Rayong Waterworks. The total number of water users was 111,977, increasing by 9.39%. Unit: Million Cubic meter (m3) Area
Oct-Dec 2008
Oct-Dec 2007
Difference
Difference (%)
Rayong Province
31.20
36.98
(5.78)
(15.63%)
Chon Buri Province
14.49
17.41
(2.92)
(16.77%)
Chachoengsao Province
6.17
1.30
4.87
374.62%
Total Sales of raw water from all areas
51.86
55.69
(3.83)
(6.88%)
Unit: Million Cubic meter (m3) Total Sales of tap water from all areas
Oct-Dec 2008
Oct-Dec 2007
12.81
11.47
Difference 1.34
Difference (%) 11.67%
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The revenue from other businesses during the 1 October 2007 31 December 2007 accounting period comprised revenue from sales of drinking water, chemicals, and CC-GRP pipes in the amount of 7.98 million Baht. This was because the Company had a policy to decelerate its activities in the drinking water business and only provided service to existing customers. Company sold all of its shares in the CC-GRP pipes business (Eastern Hobas Pipes Company Limited - EHP) in March 2008. Thus, the revenue from this source was not accounted for during the 1 October 2007 31 December 2007 accounting period, resulting in the drop in other revenues by 7.79 million Baht or 97.56 %.
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The revenue from services went up 48.75 million Baht, or 197.46%, as a result of an increase in the service engineering projects is and the water loss management activities, compared to the previous year. New projects were gradually starting, i.e. water loss management contracts with Pathumthani Rangsit Waterworks, Om Noy Sam Phran Samut Sakhon Waterworks, and Pattaya Waterworks. Revenue from building rental increased by 6.21 million Baht.
-
Interest income and combined dividend income amounted to 19.76 increased by 18.26 million Baht. This was attributed to the dividend from tap water business (UU and EGCOM TARA) in the amount of 16.2 million Baht.
1.2 Expense analysis The operating expenses of the Company and its subsidiaries totaled 400.12 million Baht, an increase of 30.61 million Baht or 8.28% from the same period of the previous year (1 October 2007 - 31 December 2007).
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Annual Report 2008 (October - December 2008)
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Unit: Million Baht Expense
Oct-Dec 2008
Oct-Dec 2007
Cost of sales-Raw water
177.14
176.25
0.89
0.50%
Cost of sales-Tap water
74.15
57.40
16.75
29.19%
0.38
6.82
(6.44)
(94.45%)
Cost of services
64.62
24.54
40.09
163.38%
Cost of sales and administration
83.83
104.50
(20.67)
(19.78%)
400.12
369.51
30.61
8.28%
Cost of sales-others
Total expense
Difference
Difference (%)
-
The raw water selling cost slightly increased by 0.89 million Baht or 0.50%. This was attributed mainly to the increase in the electricity cost for water pumping that went up by 2.77% due to the increased capacity of the Dokkrai - Nong Kho transmission line to meet the demand in Chon Buri and the electricity cost for pumping raw water to be stored at the Bang Phra reservoir. Depreciation cost of the raw water pumping system dropped by 0.34 million Baht or 0.60 % due to the more realistic adjustment of the useful life of the pipe system, i.e. from 30 years to 40 years.
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The tap water selling cost increased by 16.75 million Baht, or 29.19 % due to the increase in the energy cost, the unit cost of chemicals, and the cost of raw water at Sattahip and Bo Win Waterworks. The selling cost of drinking water and chemicals and the revenue from sales of CC-GRP pipes dropped by 6.44 million Baht or 94.45 %, consistent with the decrease in revenue. The cost of the pipe business was not accounted for during this accounting period because the Company had already sold all of its CC- GRP pipe business (EHP s shares). The cost of the service went up 40.09 million Baht or 163.38% in accordance with the increase in the revenue from services.
-
The sales and administration costs dropped by 20.67 million Baht or 19.78% due to the Management s control on expenditures in every aspect to be consistent with, and appropriate for, the current economic condition by decreasing expenses for administration and business expansion and exercising prudence in business operation. However, the Company still gives importance to CSR activities, which is an on-going project.
The Company changed the accounting policy of accounting estimates for the 1 October 2008 to 31 December 2008 period by revising the useful life of assets. The estimated useful life of every raw water pipeline was changed from 30 years to 40 years, and of every Nong Pla Lai - Map Ta Phut transmission pipeline from 25 years to 40 years, to be consistent with the condition and useful life of the assets. The change resulted in the increase in the net income in the consolidated and business-specific financial statements for the 1 October 2008 31 October 2008 by 3.7 million Baht.
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Annual Report 2008 (October - December 2008)
19
1.3 Summary of consolidated performance Unit: Million Baht Oct-Dec 2008
Oct-Dec 2007
Difference
Difference (%)
Total Income
634.31
569.96
64.35
11.29%
Total expenses before depreciation
314.92
282.04
32.88
11.66%
EBITDA
319.39
287.92
31.47
10.93%
Depreciation and amortization
85.21
87.47
(2.26)
(2.59%)
EBIT
234.19
200.45
33.73
16.83%
Interest expense
34.46
49.58
(15.13)
(30.50%)
Income tax
53.54
56.80
(3.27)
(5.75%)
Net loss of minority interests
0.00
17.73
(17.73)
(100.00%)
146.19
111.79
34.40
30.77%
Net income
During the 1 October 2008 31 December 2008 period, the consolidated EBITDA from operations of Company and its subsidiaries went up from 287.92 million Baht to 319.39 million Baht, representing an increase of 31.47 million Baht or 10.93% from that of the same period of the previous year. This came as a result of the tap water business expansion and the increase in the services provided of the service engineering and water loss management projects and from the adjustment of the useful file of the pipelines to be more accurate i.e. from 30 years to 40 years. This led to the decrease in the depreciation. Control on the cost of sales and administration led to a drop by 19.78%, and an increase of EBIT by 33.73 million Baht, or 16.83%. The interest expense amounted to 34.46 million Baht, decreased by 15.13 million Baht, or 30.50% due to the gradual repayment of a long-term loan of 775.00 million Baht and from the successful negotiation to reduce the interest to fixed rates of 4.5% and 4.8%. Previously, the rate was based on MLR-2.00% or at approximately 5.50%. Income tax decreased by 3.27 million Baht, or at 5.75% as a result of the government s reduction of corporate income tax to 25% of the net profit as an economic stimulus. Overall, the net profit of the Company and its subsidiaries amounted to 146.19 million Baht, increasing by 34.40 million Baht or 30.77% when compared to the same period (1October 2008 31 December 2008 ) of the previous year.
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Annual Report 2008 (October - December 2008)
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Important Financial Ratios Financial Ratios
Unit
Oct-Dec 2008
Oct-Dec 2007
- Liquidity ratio
Time
0.85
0.83
- Gross profit margin
%
53.22
55.56
- Net profit margin
%
23.05
19.61
- Return on assets
%
6.26
4.53
- Return on shareholders equity
%
9.55
7.50
- Debt to shareholders equity ratio
Time
0.53
0.66
The Company s financial ratio analysis showed an overall normal trend. The liquidity ratio was at 0.85 time, or approximate the same as that of the same period of the year before. The gross profit margin was at 53.23%, dropping slightly compared to the same period of last year due to the decrease in sales. The net profit margin was at 27.17%, increasing by 6.15% from that of the same period of the year before, due to the increase in the total revenue and the decrease in the cost of sales and administration expenses and the interest expense, and the fact that there was no recognition of losses following the sale of EHP as mentioned above. The return on assets went up from that of the same period of the previous year by 6.26%, reflecting the ability to manage assets for the Company s benefits. The debt to equity ratio was at 0.53 time, still meeting the condition stipulated in the loan agreement to maintain the debt to equity ratio at no more than 2 times.
2. Report and financial analysis Unit: Million Baht Assets
Oct-Dec 2008
30 Sep 2008
Difference
Total assets
9,342.14
9,330.55
11.60
0.12%
Total liabilities
3,220.34
3,354.08
(133.74)
(3.99%)
Shareholders equity
6,121.80
5,976.47
145.33
2.43%
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Difference (%)
Annual Report 2008 (October - December 2008)
21
2.1 Assets Analysis As of 31 December 2008, the total assets of the Company and its subsidiaries were 9,342.14 million Baht, increasing by 11.60 million Baht when compared to assets as of 31 September 2008. The increase was from the normal business operations of the Company and its subsidiaries, such as the net investment in assets, i.e. short-term investment in government Repo. Short-term investment in promissory notes increased by 116.07 million Baht and assets under the concession contracts and deferred concession rights increased by 22.11 million Baht. Cash decreased by 68.13 million Baht and the net value of property, plant and equipment dropped by 47.26 million Baht due to the depreciation of the raw water pumping system and the Head Office building, as the depreciation of the latter was computed from the period starting in March 2008. 2.2 Debt analysis As of 31 December 2008 the total liabilities of the Company and its subsidiaries were 3,220.34 million Baht, a decrease of 133.74 million Baht as of 31 September 2007. The 2,500 million Baht 7 year loan from a commercial bank accounted for most of the debt, which decreased after the 471.40 million Baht repayment on the due date. Current liabilities were 928.32 million Baht, increased by 184.85 million Baht. 2.3 Analysis of shareholders equity As of 31 December 2008, shareholders equity was 6,121.80 million Baht, which included minority interests of 2.22 million Baht. The shareholders equity increased by 145.33 million Baht from 31 September 2007 because the inappropriate retained earnings increased by 146 million Baht from the net profit. 3. Cash flow report and analysis Cash and cash equivalents of the Company and its subsidiaries as of 31 December 2008 amounted to 102.07 million Baht, decreased by 68.13 million Baht from the beginning of the fiscal year. Details on sources and uses of cash are given below. -
-
-
22
Cash flow from operating activities in the amount of 260.49 million Baht was from the increase in the net income from October 2008 to December 2008 that was adjusted for non-cash items such as depreciation and amortization of about 85.21 million Baht, and taking into account changes in operating assets and liabilities such as the decrease in other current assets. The net cash flow used in investment activities was 154.30 million Baht. Of this amount 25.10 million Baht was spent in the transmission pipe laying project. The net short-term investment decreased by 116.07 million Baht. Cash flow used in financing activities was 174.31 million Baht, mostly from payment of a long term loan from a commercial bank in the amount of 161.43 million Baht.
Annual Report 2008 (October - December 2008)
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Good Corporate Governance The Company recognizes and realizes the importance of good corporate governance as it is a mean to achieve the Company goal, which is to offer maximum value to its shareholders. The Company s Principles of Good Corporate Governance are meant to be put into practice by its personnel at all levels, from the Company s directors to Management, employees, associates, and contractor s employees to ensure transparency, honesty, accountability and competitiveness in its business operation. 1. Corporate Governance Policy The Board of Directors together with Management defines the Company s vision, mission and policies with consideration given to the business parameters and the Principles of Good Corporate Governance, to ensure the continued development of the Company s excellent business practices. These Principles of Good Corporate Governance were last reviewed on the parts of the Company s vision and mission in October to be the most appropriate and up to date. The Company s personnel must understand these principles and consistently comply with the policies. The Company also posts its codes of conduct on the Company s website under the heading Principles of Good Corporate Governance . 2. Shareholders Rights The Company disclosed on the website of the Stock Exchange of Thailand a resolution of the Board of Directors meeting No. 20/2008 on 22 December 2008 to convene the 2008 Ordinary General Meeting of Shareholders on 29 January 2008. Invitations to attend the meeting were sent more than 14 days in advance, with complete and clear details on the registration time, the schedules of the meetings, and the agenda of the meetings 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. To comply with the 2006 Principles of Good Corporate Governance for Listed Companies, the Company has granted the right to the minority of shareholders who hold fully paid up shares of 0.1 to 5% of the total sold shares to propose items to be included on the agenda and to nominate candidates for directorship in advance via the Company s website.
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Annual Report 2008 (October - December 2008)
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3. Stakeholders Rights The Company s business philosophy emphasizes accountability and best practice that hold confidence of stakeholders. These include: (1) 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. (2) Accountability towards clients, by managing and developing water resources and products and providing quality services that give clients maximum satisfaction. (3) 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 at their full potential. (4) Accountability towards parties having business relationships with the Company by developing relationships that will enable mutual maximum benefits with contractors, suppliers, and joint-investors, under the concept of good corporate governance. (5) 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 avoid any impacts that will lead to loss of life or property of personnel, as well as the community and the environment.
4. Shareholders Meeting In the Annual Ordinary General Shareholders Meeting held on 29 January 2009, nine directors attended the meeting including the Chairman of the Board, the Chairman of the Good Corporate Governance Committee, the Chairman of the Audit Committee, the Chairman of the Management and Investment Committee, the Chairman of the Nomination Committee and the Chairman of the Remuneration Committee. For each item on the agenda, the Chairman of the Board, who chaired the Meeting, allowed shareholders to equally exercise their rights to audit the Company s business operations, make inquiries and express their views and offer suggestions. The result of the votes on each item on the agenda was reported to the shareholders before the Meeting was over. In the minutes of the Shareholders 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.
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Annual Report 2008 (October - December 2008)
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The Company has followed the framework of the Shareholders Meeting Quality Assessment Project. For shareholders convenience, the barcode system has been used for registration and the E-voting Program was used for vote counting through arrangements with Thailand Securities Depository Co., Ltd. (TSD). The bar code system for vote counting was also used at the 2008 Annual Ordinary General Shareholders Meeting. In this meeting, it was the Company s policy that all shareholders received complete and adequate information for their decision making. Opportunities were given to all shareholders to equally exercise their rights to make inquiries, express their views and offer suggestions regarding the Company s operations. Those who were not able to personally attend the meetings were allowed to vote by proxies. 5. Leadership and Vision The Board of Directors play very important role in defining the Company s vision, policies, and strategic plans, by setting a long-term corporate plan every three years. Each year, the Company s Management proposes operationstrategies and activities to the members of the Management and Investment Committee and the Board of Directors respectively for their consideration, comments and approval of action plans, including the annual expenditure budget. In addition, Management reports on the progress of the annual action plans and significant obstacles during the quarterly meetings of the Audit Committee and monthly meetings of the Board of Directors as well as presenting the Boards any investment projects of over 200 million Baht in capital. 6. Conflict of Interest Connected transactions between the Company and other companies within the group or other interested parties will go through approval procedures that are correct and accurate, by using the same pricing 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, at every monthly Board Meeting, the Board of Directors and Management regularly require reports on the securities holding of members of the Board and the Management. In the fiscal year 2008 there were connected transactions that had to be reported in the interest of the Company. The Company therefore followed the direction of the Stock Exchange of Thailand under which concerned director for each transaction was not allowed to approve such transaction. The Company meticulously disclosed its connected transactions. 7. Corporate Ethics In addition to the implementation of the Principles of Good Corporate Governance of Eastern Management and Development of Water Resources Company , the Company has also prepared the Board of Directors Manual , which was declared effective on 17 August 2006 and constantly updated to be timely and appropriate for the changing rules, to be used by directors as the standard for compliance with the Principles of Good Corporate Governance. All the Company s directors are required to sign in acceptance of the said Manual. The employees Code of Business Ethics has also been made effective and training on good corporate governance has been provided for new employees. A project of knowledge and understanding of good corporate governance has been organized for employees on a continual basis. BACK TO CONTENT
Annual Report 2008 (October - December 2008)
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8. Balance of Power by Independent Directors As of 31 December 2008, there were 11 members on the Board of Directors comprising: 1 Executive director 1 person 5 Non-executive directors 6 persons 5 Independent directors 4 person 9. Centralization and Decentralization of Power The Board of Directors focuses on transparency in business operations, decentralization of decision making, and division of authority in reviewing and approving various matters. The Company Chairman must not be the same person as the President & CEO. Members of the Audit Committee do not have the rights to sign any document that will legally bind the Company and do not have monetary oversight in the finance and management of the Company and its affiliated companies. 10. Remunerations of Directors and Management Remunerations of directors and executives follow the principles and policies defined by the Board of Directors. The Remuneration Committee considers and proposes suitable remunerations to the Board of Directors and to shareholders (on behalf of Directors remunerations) for consideration and approval. Remunerations of directors and Management in 2008 (October December 2008) are summarized below. 2008 Directors and Management s Remunerations (quarterly) Directors remunerations during 1 October 2008 31 December 2008 Director s Allowance (Baht)
Names of Directors 1 2 3 4 5 6 7 8 9 10 11
Mr. Utid Mr. Kanoksakdi Pol. Gen. Ajiravid Pol. Lt. Gen. Somyot Pol. Maj. Gen. Pimol Mr. Chakarn Mr. Nattachak Mrs. Monta Mr. Rasda Pongpaew Pongpaew
Tamwatin Bhinsaeng Subarnbhesaj Poompanmoung Sinthunava Saengruksawong Pattamasingh Na Ayuthaya Pranootnorapal Pongpaew (1) Pongpaew Pongpaew
Chairman of the Board Director Director Director Director Director Director Director Director Director Director
25,000 20,000 30,000 30,000 30,000 20,000 30,000 30,000 30,000 30,000 30,000
Committee Member s Allowance (Baht) 10,000 30,000 50,000 50,000 80,000 20,000 40,000 30,000 40,000 50,000 30,000
Director s Remunerations (Baht) 112,500 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000 90,000
Nine Executive Director and Executive Members 5,457,876
Notes: (1) The remunerations of a director, Mr. Rasda Pongpaew, in the amount of 160,000 Baht was based on the regulations of Egcom Tara Company Limited (EGCO), whereby a director s remunerations from directorship in other companies are transferred to the account of the Thai Forest Conservation Foundation, a foundation established with the objectives to raise awareness about and networking for conservation of forests and water resources.
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Annual Report 2008 (October - December 2008)
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10.1 Management s Remunerations Ten members of the Management Executives received benefits for their 2008 performance (October December 2008) in the form of salaries and remunerations in the amount of 5,307,876 Baht. 10.2 Directors Securities Holding As of 31 December 2008, no director held the Company s securities. Nine executive members held 1,534,580 ordinary shares. 10.3 Contributions to Provident Fund In the fiscal year 2008 ending at 31 December 2008, the Company s contributions to the Provident Fund for 10 executive members in the total of 393,630.30 Baht. 11. Board of Directors Meetings The Board of Directors monthly meetings are scheduled during the third or fourth week of the month. The President, serving as the Secretary to the Board of Directors, sends an invitation together with the Meeting Agenda and relevant documents in advance for directors to review the information before attending the meeting. In the fiscal year 2008 (October - December 2008) 3 meetings were held and attended by members of the Board. Details on individual director s attendance are given below.
Names of Directors 1 2 3 4 5 6 7 8 9 10 11
Mr. Utid Mr. Kanoksakdi Pol. Gen. Ajiravid Pol. Lt. Gen. Somyot Pol. Maj. Gen. Pimol Mr. Chakarn Mr. Nattachak Mrs. Monta Mr. Rasda Mr. Chanchai Mr. Praphant
Tamwatin Bhinsaeng Subarnbhesaj Poompanmoung Sinthunava Saengruksawong Pattamasingh Na Ayuthaya Pranootnorapal Pongpaew Tontisirin Asava-aree
Chairman Director Director Director Director Director Director Director Director Director Director
No. of Meetings Attended/No. of Meetings Held 2/3 2/3 3/3 3/3 3/3 2/3 3/3 3/3 3/3 3/3 3/3
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 and clarity in line with the Company s mission and policies before presenting them to the Board of Directors for approval, or ratification, or further recommendations, whichever the case may be. Details on the committees established by the Board of Directors and their meeting attendance records during the fiscal year 2008 (October December 2008 accounting period) are listed below.
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Annual Report 2008 (October - December 2008)
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12.1 As of 31 December 2008, the Audit Committee comprised 3 independent directors and 2 advisors whose names are listed below. No. 1. 2. 3. 4. 5
Name-Surname Pol. Gen. Ajiravid Subarnbhesaj Pol. Maj. Gen. Pimol Sinthunava Mr. Chanchai Tontisirin Mrs. Leena Charoensri Mr. Chakkrit Parapuntakul
Position
No. of Meetings Attended/No. of Meetings Held
Chairman Member Member Advisor to the Audit Committee Advisor to the Audit Committee
4/4 4/4 4/4 4/4 3/4
The Audit Committee is responsible mainly for revising and verifying the accuracy and credibility of the Company s financial statements to ensure that they meet international standards before submitting them to the Board of Directors. The Committee reviews and gives recommendations regarding evaluation of the efficiency and effectiveness of the Company s internal control system, compliance with laws, rules, and regulations, as well as ensuring the effectiveness and independence of the Audit Committee s administrative process. The Committee places emphasis on transparent guidelines and clear distinction among the Board of Directors, the Internal Audit Department, the Management, and the External Auditor. Other functions include giving initial approval to the appointments of the External Auditors and determining his/her remunerations to be proposed to the Board of Directors and shareholders. 12.2 As of 31 December 2008, the Executive and Investment Committee comprised 3 directors whose names are listed below. No. 1. 2. 3.
Name-Surname Mr. Kanoksakdi Bhinsaeng Pol. Lt. Gen. Somyot Poompanmoung Mr. Praphant Asava-aree
Position Chairman Member Member
No. of Meetings Attended/No. of Meetings Held 2/2 2/2 2/2
The Executive and Investment Committee are assigned by the Board of Directors to play the key role in supervising the Company s operations to have the efficiency and business strength in line with the policy of the Board of Directors. The Committee reviews and screen the various matters before presenting them to the Board of Directors, supports the work of the Management team to achieve the Company s objectives, policies, strategies, and framework for the Company s short-term and long-term investments in core and related businesses. Other functions include reviewing matters requiring approval of the Board of Directors with respect to procurement in the amounts exceeding the authority of the President & CEO. In addition, the Committee reviews projects capital that call for the establishment of processes and criteria as well as project financial analysis in accordance with the Company s work plans before presenting the matters to the Board of Directors for consideration. 12.3 As of 31 December 2008, the Corporate Governance Committee comprised 3 directors whose names are listed below. No. 1. 2. 3.
Name-Surname Mr. Utid Tamwatin Pol. Maj. Gen. Pimol Sinthunava Mr. Rasda Pongpaew
Position
No. of Meetings Attended/No. of Meetings Held
Chairman Member
1/1 1/1
Member
1/1
Note: (1) Mr. Utid Tamwatin resigned from the Corporate Governance Committee on 29 January 2009. 28
Annual Report 2008 (October - December 2008)
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The Corporate Governance Committee has duty to ensure that the Company has complied with important elements of the corporate governance process that is effective and in line with the requirements of the Stock Exchange of Thailand. The Committee also ensure that the Principles of Good Corporate Governance are implemented with emphasis on continuous development and best practice and that evaluation of compliance with the Company s policies are to be conducted periodically. 12.4 As of 31 December 2008, the Risk Management Committee comprised 5 directors whose names are listed below. No. 1 2. 3. 4. 5.
Name-Surname Mrs. Monta Pranootnorapal Pol. Lt. Gen. Somyot Poompanmoung Mr. Chakarn Saengruksawong Mr. Chanchai Tontisirin Mr. Praphant Asava-aree
Position Chairman Member Member Member Member
No. of Meetings Attended/No. of Meetings Held 1/1 1/1 1/1 1/1 1/1
The Risk Management Committee is responsible mainly for overseeing and reviewing risk management policy, standard practice, strategies, and overall risk assessment. It also reviews adequacy of policy of the risk management system, the system s efficiency, and compliance with the policy, to ensure that the risk management strategies are implemented appropriately. 12.5 listed below. No. 1. 2. 3.
As of 31 December 2008, the Nominating Committee comprised 3 directors whose names are
Name-Surname Pol. Maj. Gen. Pimol Sinthunava Mr. Nattachak Pattamasingh Na Ayuthaya Mr. Chakarn Saengruksawong
Position Chairman Member Member
No. of Meetings Attended/No. of Meetings Held 2/2 1/2
1/2
The Nominating Committee consists of members appointed by the Board of Directors as the most suitable persons to be considered for appointments as directors of the Company and affiliated companies and the President & CEO. The Committee also gives opinions regarding to the management structure of the Board of Directors and other committees. 12.6 listed below. No. 1. 2. 3.
As of 31 December 2008, the Remuneration Committee comprised 3 directors whose names are
Name-Surname Mr. Nattachak Pattamasingh Na Ayuthaya Pol. Gen. Ajiravid Subarnbhesaj Mr. Kanoksakdi Bhinsaeng
Position Chairman Member Member
No. of Meetings Attended/No. of Meetings Held 1/1 1/1 1/1
The Remuneration Committee s main function is to formulate policy concerning remunerations, other fringe benefits and to set up an evaluation guideline of the performance of the Board of Directors, affiliated companies, and the Company s executives. The Committee is also required to disclose the policies regarding remunerations and relevant details and prepare reports in the required format. BACK TO CONTENT
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12.7 As of 31 December 2008, the Performance Criteria and Evaluation Committee comprised 4 directors whose names are listed below. No. 1. 2. 3. 4
Name-Surname Pol. Lt. Gen. Somyot Poompanmoung Mr. Nattachak Pattamasingh Na Ayuthaya Mrs. Monta Pranootnorapal Mr. Rasda Pongpaew
Position Chairman Director Director Director
No. of Meetings Attended/No. of Meetings Held 2/2 1/2 2/2 2/2
The Board of Directors has established the Performance Criteria and Evaluation Committee to formulate performance criteria and evaluate the Company s annual Corporate KPIs, which requires quarterly follow ups. The Board of Directors has regularly and continuously performed self-evaluation every year in order to review the accomplishments as well as problems and obstacle experience over the year. The results are used for improvement of work efficiency, in accordance with the Principles of Good Corporate Governance. In 2008, the average score of all directors was 4.69 out of 5. Risk Management and Internal Control received the highest average scores of 5 as a result of the Company s adequate and appropriate risk management system. Performance of duties was concerned by the Chairman of the Board, the clarity in the separation of the role of the Board of Directors and the Management as well as the equity of shareholders was rated 4.89 as the second place. The Company was ranked third with the score of 4.81, gained on time management for performance of duties and their ability to voice their views openly and straightforward without being dominated by anyone. During the meetings, when connected transactions are considered, interested directors will abstain from comments and votes. The Board of Directors evaluated the performance of the CEO, using the KPIs of the consortium and the CEO evaluation form developed by the Company s Manual for Competency Evaluation of the Management and Employees and guidelines from other listed companies. The two-dimensional evaluation criteria comprised Core Competency and Managerial Competency. 13. Selection of Directors and Management The Board of Directors of the Company appoints representatives as Nominating Committee members to find the most 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 Nominating Committees 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 Annual General Shareholders Meeting. According to the Company s Articles of Association, the Company s Board of Directors shall consist of at least five but not more than eleven directors elected by the Shareholders. The directors shall then elect among themselves the Chairman of the Board and may elect the Vice Chairman, the President & CEO, and holders of 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 Shareholders Meeting in accordance with the following criteria and procedure.
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Annual Report 2008 (October - December 2008)
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1. Each shareholder shall have one vote for each share 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. Members of the Board of Directors shall have the required qualifications and do not have prohibited characteristics under the law governing public limited companies and the Securities and Exchange Act. 5. Independent directors shall have all the qualifications as defined by the Company in accordance with the regulations of the Securities and Exchange Commission (SEC). A shareholders 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. In the fiscal year 2008 (October December 2008) , five members of the Board of Directors represented major shareholders: three from the Provincial Waterworks Authority, one from Electricity Generating Public Company Limited, and one from the Industrial Estate Authority of Thailand. 14. Internal Information Control The Company s guideline concerning the use of internal information by the Company s directors, management and employees are set in the Principles of Good Corporate Governance and can be summarized as follows: 1. Directors, Management, employees, supporting staff, and outsourced employees have the duty to accept legal and ethical obligations to safeguard and not to disclose, the Company s information and documents that are classified as confidential or trade secrets which will have critical impact on the Company s success and stability. 2. The confidential trade information shall be well protected and not leak 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 Company s President & CEO. If the information is related to joint-venture partners, their approval shall also be required. The functions for disseminating the information to the public are the Marketing and Public Affairs Communication Department and the Investors Relations section. The Public Affairs officers are also in charge of disseminating news and information to other employees. In addition, the Company must inform the Directors and Management of their responsibility to report the acquisition or sales of the Company s securities exceeding 5% of the total Company s sold, and their securities holding, to the Securities and Exchange Commission in accordance with the prescribed format and procedure. Such information is also required to be reported to the Board of Directors in every meeting. BACK TO CONTENT
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15. Relationships with Investors The Company realizes that the internal information is vital to the decisions of investors, analysts, and interest groups. Thus it gives significance to accurate, complete, transparent and timely disclosure of information in line with the criteria set by the Office of Securities and Exchange Commission and the Stock Exchange of Thailand. Moreover, the information, both in Thai and English, has been disseminated. The information, must be regularly updated, includes the financial statements, the report on the Company s performance, the Management Discussion and Analysis, the report on information disclosed to the SET via the SET s website (www.set.or.th) and the information posted on the Company s website (www.eastwater.com). The Investor Relations Unit (02-272-1600, Extension 2525 or ir@eastwater.com) has been established to represent the Company in communicating and providing information on the affairs and activities of the Company to investors, shareholders, analysts, and the general public. The functions of this unit follow the annual investor relations plans to present the accomplishments of the Company in the following formats: • Analyst meetings • Investor Quarterly meetings • Teleconference and conference calls for investors overseas • Meet the Investors activities organized jointly with the Stock Exchange on the Opportunity Day . • Company visits to meet with executives and inquire about the management practice and the progress of various projects. • Site Visits Moreover, interested parties may subscribe to the Company s newsletter (E-Newsletters) via the Company s website. The Investor Relations staff gather comments and recommendations from investors, analysts and relevant parties which will be presented to the Management for consideration and appropriate improvement in line with the Company s policies.
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Annual Report 2008 (October - December 2008)
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Definition of Independent Director 1. An independent director must hold less than 1 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, No. 4, B.E. 2535). 2. An independent director is not related by blood or by law as a parent, a spouse, a sibling, a child, or a spouse of a child of a Company executive member, a major shareholder, a person in control, or a person to be nominated as an executive member of a person in control of the Company or its subsidiaries. 3. An independent director does not take part in the management of the Company, a subsidiary, an affiliated company, a subsidiary of the same tier or a juristic person who may have a conflict of interest with the Company, at present and during the two years period prior to the appointment as an independent director. 4. An independent director does not have any business relationship with the Company. An auditor may not be nominated an independent director. For other professional service providers such a as a legal advisor, a financial advisor, an asset appraiser, the value involved must not exceed 2 million Baht per year. Details of relationship must be as defined by the SEC as follows: A. Nature of relationship Professional Service Relationship 1. Auditors and other professional service providers such as legal advisors, financial advisors, asset appraisers. 2. Significant level of non-independence - Auditor: Prohibited under any circumstance - Others: value not exceeding 2 million Baht per year. Trade/Business Relationship (Use the same SET s guideline for connected transaction) - Nature of relationship: Covering all types of business items, i.e. normal transactions; renting/renting out immovable property; items relating to service assets; and items about providing or receiving financial assistance. - Significant level of non-independence: Items value exceeding or equal to 20 million Baht, or exceeding or equal to 3% of net tangible assets, whichever is lower. B. In the case of the relationship under A. with a juristic person, major shareholders and directors (except independent directors/ audit committee members) are deemed non-independent. C. Relationship under A and B is prohibited at present and two years prior to the appointment.
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Annual Report 2008 (October - December 2008)
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2008
Assessment of Adequacy of Internal Control Systems The company gives importance to the internal control system, with emphasis on adequate and appropriate control that contributes to business efficiency in terms of finance, operations, risk management and monitoring. The principles and the essence of the assessment of the adequacy of the internal control system can be viewed from five aspects. 1. Organization and Environment The Board of Directors plays an important role in defining the vision, policy and strategies of the Company by setting long-term business plans, offering opinions, and approving strategies, activities, and annual action plans. In addition, the Board of Directors has also implemented the application of Key Performance Indicators to assess the performance in all functions of the organizations to ensure that performance monitoring and assessment are carried out fairly, efficiently and systematically in line with the organization s goals and objectives. The policy for internal management focuses on having the power balancing mechanism among the Board of Directors, the management and shareholders. Members of the Board of Directors include at least three independent or external directors so that there will be a balance between members who may have conflict to interest with the Company and independent or external members. The Company communicates with investors regularly disseminate the Company s information to the public. Committees have been prepared review and pass a decision on important issues to protect shareholders interest. In addition, the Company has implemented the corporate governance of Eastern Water Resources Development and Management Public Company Limited, the Company Code of Conduct, and Employee s Business Ethics, to be observed by its personnel of all levels, with emphasis on honesty and business ethics. 2. Risk Management The Enterprise Risk Management concept has been applied by conducting risk assessments by various processes and risk factor analysis. The current control measures and the additional control will be continuously supported employees from every department in risk assessment and risk management. Risk management action plans have been drawn up to increase the efficiency of the company s internal control systems. It is also used for controlling the risks at an acceptable level that corresponds with the changes in the circumstances and the risk factors themselves. A specific work unit has been assigned to monitor the implementation of the Risk Management Project, evaluate the result, and prepare a report thereof to be presented to the Risk Management Committee and the Board of Directors for reviews and decision making in order to ensure that the Company s risk management process is dynamic, consistent, and uninterrupted.
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Annual Report 2008 (October - December 2008)
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3. Control of the Management s Performance The scope of the authorities and the amount of money allowed to be spent by the Management have been clearly defined to be consistent with the principles of good internal control regarding division of duties and verification of procedure. Functions involve the authority to approve bookkeeping and information, which are separated from property management. Moreover, the Company has been granted ISO 9001:2001 and ISO 14001:2004 certification. Work Procedures and Work Instructions have been developed to be used as reference to ensure the standards of work. Training has been organized so that employees could understand and perform their work according to the standards. In the case of connected transactions between the Company and its associated companies including companies and parties with common interest, these items are scrutinized approved accurately, transparently under the same conditions as those applied to other trade partners. Details on such transactions are already presented in the Auditor s Notes to the Financial Statements. The Company has continuously and regularly supervised the operations of its associated companies. Their progress and business performance have been reported to the Board of Directors by a specific work unit which has been assigned, as well as following up on feedbacks to ensure that they are consistent with the resolutions of the Board of Directors. In addition, it coordinates the policies to ensure that every company within the group is operating its business along the direction that is consistent with the policies of the Board of Directors. A compliance unit has been set up to assure that the Company s business activities comply with relevant laws, rules and regulations. 4. Information and Communication System The Company has provided adequate amount of important information for the Board s decision making. The information is presented to the Board s members in advance for their preliminary review. On the agenda of every Board meeting and the meeting of sub-committees are on matters from the previous meetings and the resolutions to be used as references, together with related legal requirements (if any), so that the Board will acknowledge the comprehensive information for their decision making so they can provide recommendation that will lead to an on-going improvement and development of the Company. The facts will be specified in regards to the progress of action taken by the Management in accordance with comments from the committees. Such comments include reasons, business sensitivity analysis, and anticipated obstacles or impact. Recommendations often include issues for consideration and/or proposals of options for discussion/consideration. In submitting every minutes of the meeting, the Company will inform individual director that they can indicate their intention to make an amendment to the Minutes within approximately five days after receiving the minutes.
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Annual Report 2008 (October - December 2008)
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Moreover, the Company has been continuously applied and developed the use of information system and internal data base, so that employees at all level can have access to information related to their work at an appropriate level. This can be achieved through the policy and the system that clearly spells out the level of accessibility in order to use such data and information to perform their work.
5. Monitoring System The Company follows up on the goals indicated in the long-term business plan and the annual action plans. Key Performance Indicators (KPIs) of the progress and result of the performance have been regularly reported to the meeting of the Board of Directors every quarter. The objective is to review on matters and define guidelines for improvement and corrections of any inefficiency in accordance with the changing situations. The emphasis is on taking timely corrective action. The Company gives great importance to internal audit, emphasizing the value added for the organization. Internal risk assessment data has been used in the risk-based audit planning and a consultant has been employed for co-sourcing with the Audit Office every year. This is to convince the Board of Directors and the Management in the efficiency and effectiveness of the Company s internal control system. The accuracy and credibility of data and information, i.e., accounting information and information used for business operation has been ensured that they are is in compliance with the law, rules, and regulations relating to the Company. In addition, other performance monitoring processes are implemented by means of the Company s Internal Quality and Environment Monitoring System in accordance with ISO 9001:2000 and ISO 14001:2004. Based on the key elements of the Assessment of the Adequacy of the Internal Systems as mentioned above, the Company is confident that its internal control systems are adequate and suitable for its business, contribute to transparency in work execution and enhance the effectiveness of sustainable business operations.
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Annual Report 2008 (October - December 2008)
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Report of the Audit Committee for the Three-month Period (1 October 2008– 31 December 2008) In the three-month period (1 October 2008 31 December 2008), the Audit Committee held four meetings with the Management of the Company and its subsidiaries, the external auditor, and the internal auditor. Inquiries were made and explanations were satisfactorily given from the parties concerned. Significant details of the Company s performance are given below. 1. Verification of financial statements and connected transactions The financial statements of the 3-month period (from 1 October 2008 to 31 December 2008) were reviewed and verified. Inquiries were made to the external auditor and the internal auditor and explanations were given by Management. Emphasis was placed on information disclosure and adequate provisioning for projects implemented in line with the government policies and the Group s owned projects. During this period, there was no significant connected transactions other than those normal transactions with major shareholders or associated companies. Information on these transactions was sufficiently disclosed in the financial statements and notes to the financial statements. 2. Supervision of the internal control system and compliance with relevant law, rules, and regulations The three-year risk-based internal audit plan (2008 2010) and the internal audit plan for the fiscal year 2009 were reviewed and approved. Such plans apply to all work functions in the companies within the Group, with consideration given to additional information from four sources as follows: • Result of the 2009 Risk Assessment from the Management • Additional interviews of members of the Management on the needs or issues of concern • Comments from the Auditor • Analysis of the Company s financial statements. The Committee acknowledged on the progress of the evaluation of the efficiency and effectiveness of the internal control during this three-month period, which was being implemented jointly by the Internal Audit Department and an internal audit consultancy company. Compliance with regulations and obligations with third party and relevant law was verified, both for the Company and its subsidiaries. Action taken by the Management for recommended improvement/rectification was also monitored on a continuous basis. 3. Supervision of the Internal Audit Department The action plans, the annual budget, the human resource development plans, and the man power structure of the Internal Audit Department will be reviewed and approved. Support is given to the Internal Audit Department to perform its work independently and more efficiently through the restructure of the Internal Audit Department. As a result, approval will be granted for the Internal Audit Department and divided into two sections; Operational Auditing and Accounting and Financial Auditing. In 2008, the Committee approved auditing co-sourcing partnership with Deloitte Touche Tohmatsu Jaiyos Company Limited. This arrangement would enhance experience sharing and issues detected from the audit would be addressed to constantly add value to the Company.
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Annual Report 2008 (October - December 2008)
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4. Supervision of Company Auditor s performance The Audit Committee, in the Meeting No.9/2008, reviewed the selection of the Company Auditor and the auditing fees. Qualifications of the auditors had been checked to ensure compliancy with the Notification of the Office of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand, and to ascertain that the auditors do not have any relationship with the Company and its subsidiaries. The Committee then proposed to the Board of Directors that Mrs. Saifon Inkaew, License No. 4434 or Ms. Rattana Jala, License No. 3734 or Miss Kamoltip Lertwitworathep, License No. 4377 of Ernst & Young Office Limited, the current Company s Auditor be reappointed the Company auditor for the fiscal year 2008. The proposal will be subsequently presented to the General Shareholders Meeting for approval. As Mrs. Saifon Inkaew, License No. 4434, had audited and presented opinions on the Company s financial statements for five consecutive years, the Audit Committee proposed to the Board of Directors that in the fiscal year 2009 (January 2009 December 2009) the position of the Company Auditor be rotated to Ms. Rattana Jala, License No. 3734 or Miss Kamoltip Lertwitworathep, License No. 4377, or Mr. Wichart Loketkrawee, License No. 4451. The Auditor s fees of the Company and it subsidiaries for the fiscal year 2008 to 2009 following negotiations with the Auditor since 2008 are summarized below. • Auditor s fee for the Group s consolidated financial statements for the 3-month period (October 2008 December 2008) was 1,076,000 Baht. Of this amount, 348,000 Baht was the fee for the Company (EW). • Auditor s fee for the Group s consolidated financial statements for the fiscal year 2009 (January 2009 December 2009) was set as 3,310,000 Baht. Of this amount, 1,110,000 Baht was for the fee for the Company (EW). In summary, the Audit Committee has duly performed all of its duties as stated in the Audit Committee s Charter, which have been approved by the Board of Directors and comply with the SET s regulations. The Audit Committee agrees with the Company Auditor s opinion that the Company s financial statements are correct in accordance with Thailand s Generally Accepted Accounting Principles and that connected transactions have been disclosed completely, accurately, and in details. Moreover, the Company has implemented an appropriate and effective internal audit control system and throughout the 3-month period (1 October 31 December 2008) no significant issues regarding failure to comply with relevant regulations, obligations and laws have been found. Improvement has also been made to in the Company s operations to ensure consistency and appropriateness to the changing business environment.
(Pol. Gen. Ajiravid Subarnbhesaj) Chairman of the Audit Committee
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Annual Report 2008 (October - December 2008)
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Good Corporate Governance Report from the Corporate Governance Committee (1 October 2008 31 December 2008) The Eastern Water Resources Development and Management PLC has always given great importance to good corporate governance, believing that it is a key element in running the business for the maximum benefits of shareholders. The Board of Directors recognizes the significance of good corporate governance that will contribute to the company s sustainable growth and strengthen all stakeholders confidence by adhering to the principle of transparency, honesty and competitiveness in business operations. The Company has implemented the Principles of Good Corporate Governance, the Board of Director Manual, and the Employees Code of Business Ethics based on the 15 principles of good corporate governance of the Stock Exchange of Thailand. These principles of good governance have been reviewed to be more appropriate, up to date, and in compliance with relevant laws and regulations. Details are accessible on the Company s website under the heading Good Corporate Governance. The Corporate Governance Committee during the fiscal year 2008 (October-December 2008) has continuously given importance to the rights of minority shareholders to propose matters to be considered and to nominate candidates for directorship in advance of the shareholders meeting. The Committee has accepted the shareholders comments on the qualifications of sub-committee members and would revise the criteria as appropriate. Other recommendations, such as that on the formulation of the policy on remunerations of directors, have been accepted for considerations and further action will be taken in 2009. The Corporate Governance Committee reaffirms its intention to oversee the Company s affairs in order to maintain its value in a sustainable manner.
Mr. Utid Tamwatin Chairman of the Corporate Governance Committee
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Annual Report 2008 (October - December 2008)
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Report on the Board of Directors’ Responsibility towards the Financial Statements The Board of Directors had financial statements prepared to show the financial status and business performance of the Company for the period from 1 October 2008 to 31 December 2008 in accordance with the Public Limited Company Act, B.E. 2535 (1992). The Company s Directors acknowledge that in their capacity as directors of a listed company in the Stock Exchange of Thailand, they have responsibility for the Company s financial statements including the financial information appearing in the Annual Report for the period from 1 October 2008 to 31 December 2008. 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 and to ensure that assets have been maintained. 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 Committee s opinions for the period from 1 October 2008 to 31 December 2008 are presented in the Report of the Audit Committee in the Annual Report. In this light, the Board of Directors is of the opinion that the Company has prudently and rationally exercised its judgment and has used the best forecasting method in preparing the financial statements, under the accounting policy that is appropriate, consistent, and in compliance with Thailand s generally accepted accounting standards. Important information has also been adequately disclosed in the Notes to Financial Statements.
(Mr. Utid Tamwatin) Chairman of the Board of Directors
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Annual Report 2008 (October - December 2008)
(Mr. Praphant Asava-Aree) President and CEO
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Report of Independent Auditor To The 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 of 31 December 2008 and 30 September 2008, the consolidated statements of income, changes in shareholders equity and cash flows for the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008, 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 management of the Company and its subsidiaries as to their correctness and the 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 31 December 2008 and 30 September 2008 and the results of their operations and cash flows for the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008 in accordance with generally accepted accounting principles. Without qualifying my opinion on the aforementioned financial statements, I draw attention to the matter described in Note 18 to the financial statements regarding a pipeline connecting project, which is in compliance with a Cabinet resolution that assigned for the Company to undertake construction and make advance payment on behalf of a government agency. Cumulative payments up to 31 December 2008 total Baht 642 million and the relevant government unit is to pay to the Company by gradually offsetting the charges on raw water that the Company will purchase from that agency each year. The government agency has not yet determined the amount to be withheld from the volumes of raw water purchased every year. However, the Company s management believes that the Company will not incur any loss as a result of entering into this contract and making the advance payments. In addition, the Company s management believes that the project would be beneficial and should the government agency decide not to operate the project itself, the Company would be able to invest in this project by itself, as it would with its other projects, in order to generate benefits. The Company is in the process of negotiating with the relevant agencies and the outcome of such negotiations and other related matters had not yet been finalised on the authorisation date of the financial statements under report.
Saifon Inkaew Certified Public Accountant (Thailand) No. 4434 Ernst & Young Office Limited Bangkok: 27 February 2009 BACK TO CONTENT
Annual Report 2008 (October - December 2008)
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Balance Sheets Eastern Water Resources Development and Management Public Company Limited and its subsidiaries As at 31 December 2008 and 30 September 2008
Note
Assets Current assets Cash and cash equivalents Securities purchased under resale agreements Current investments Trade accounts receivable Related parties Unrelated parties - net Trade accounts receivable - net Unbilled receivables Related parties Unrelated parties Total unbilled receivables Service income receivable - related party Billed Unbilled Total service income receivable - related party Short-term loan to an unrelated party - net Inventories - net Other current assets Dividend receivable from related parties Other receivables - related parties Input taxes awaiting refund others Total other current assets Total current assets Non-current assets Restricted bank deposits Investments in subsidiaries - net Long-term investments Long-term loan to related party Other receivable Property, plant and equipment - net Assets under concession contracts - net Deferred concession rights acquisition costs - net Intangible asset - net Other non-current assets Total non-current assets Total assets
(Unit: Baht) Consolidated financial statements Separate financial statements 31 December 2008 30 September 2008 31 December 2008 30 September 2008
9 10 11 12 8.2
102,065,552 261,010,051 83,584,275
170,193,618 85,000,000 143,521,703
55,117,722 261,010,051 83,584,275
128,549,012 85,000,000 143,521,703
112,615,968 61,467,355 174,083,323
108,763,502 87,439,397 196,202,899
115,881,111 59,712,159 175,593,270
114,755,884 62,855,553 177,611,437
8.2
62,129,014 3,843,161 65,972,175
60,147,229 60,147,229
-
-
27,477,545 22,704,707 50,182,252 10,468,991
16,961,198 10,263,074 27,224,272 8,800,000 18,200,035
167,188
8,800,000 8,228,361
8,087,954 6,489 2,615,779 35,072,463 45,782,685 793,149,304
10,919 2,280,821 42,712,685 45,004,425 754,294,181
22,112,954 4,768,602 27,252,206 54,133,762 629,606,268
28,050,000 6,866,856 33,094,427 68,011,283 619,721,796
8.2
13 14 8.2 8.2
15 9,076,000 9,076,000 9,076,000 9,076,000 16 - 514,999,930 514,999,930 11 85,477,500 85,477,500 85,387,500 85,387,500 8.2, 8.3 - 300,000,000 300,000,000 18 642,199,200 642,199,200 642,199,200 642,199,200 19 6,712,684,455 6,759,953,129 6,528,333,204 6,575,139,991 20 390,382,036 381,006,132 21 534,246,859 521,515,116 22 160,596,580 162,700,919 14,331,386 14,323,897 9,251,303 9,242,712 8,548,994,016 8,576,251,893 8,089,247,137 8,136,045,333 9,342,143,320 9,330,546,074 8,718,853,405 8,755,767,129
The accompanying notes are an integral part of the financial statements. 42
Annual Report 2008 (October - December 2008)
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Balance Sheets (Continued) Eastern Water Resources Development and Management Public Company Limited and its subsidiaries As at 31 December 2008 and 30 September 2008
Note
Liabilities and shareholders equity Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Related parties Unrelated parties Total trade accounts payable Current portion of long-term liabilities under finance lease agreements Current portion of long-term loans from financial institutions Other current liabilities Accrued expenses Payable for purchase of fixed assets Advances received Accrued interest expenses Corporate income tax payable Others - related parties Total other current liabilities Total current liabilities Non-current liabilities Long-term liabilities under finance lease agreements - net of current portion Long-term loans from financial institutions - net of current portion Retentions payable Rental guarantees received from related parties Total non-current liabilities Total liabilities
(Unit: Baht) Consolidated financial statements Separate financial statements 31 December 2008 30 September 2008 31 December 2008 30 September 2008
23
7,500,000
72,009,842
-
20,009,842
8.2
6,997,992 60,524,893 67,522,885
4,114,414 68,972,969 73,087,383
5,999,054 8,788,054 14,787,108
6,083,125 8,613,827 14,696,952
24
3,559,376
2,964,012
2,039,439
2,008,452
25
495,716,000
420,716,000
450,000,000
375,000,000
154,154,630 25,668,900 25,530,754 10,251,282 138,418,282 354,023,848 928,322,109
183,691,888 16,294,043 8,592,927 801,554 92,917,209 5,114,994 307,412,615 876,189,852
106,529,699 7,666,927 10,168,988 119,966,741 32,316,490 276,648,845 743,475,392
134,714,408 10,039,324 339,041 80,304,877 44,571,522 269,969,172 681,684,418
3,547,744
4,897,818
3,072,577
3,591,983
8.2
24 25 8.2
2,251,068,000 2,434,997,000 2,050,000,000 2,275,000,000 37,401,263 37,990,511 25,600,165 24,495,928 761,238 761,238 2,292,017,007 2,477,885,329 2,079,433,980 2,303,849,149 3,220,339,116 3,354,075,181 2,822,909,372 2,985,533,567
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Annual Report 2008 (October - December 2008)
43
Balance Sheets (Continued) Eastern Water Resources Development and Management Public Company Limited and its subsidiaries As at 31 December 2008 and 30 September 2008
Note
Shareholders equity Share capital Registered, issued and fully paid-up 1,663,725,149 ordinary shares of Baht 1 each Share premium Assets transferred from customers Retained earnings Appropriated - statutory reserve Unappropriated Equity attributable to the Company s shareholders Minority interests - equity attributable to minority shareholders of subsidiaries Total shareholders equity Total liabilities and shareholders equity
(Unit: Baht) Consolidated financial statements Separate financial statements 31 December 2008 30 September 2008 31 December 2008 30 September 2008
26 26 28
1,663,725,149 1,663,725,149 1,663,725,149 1,663,725,149 2,138,522,279 2,138,522,279 2,138,522,279 2,138,522,279 45,344,716 46,201,078 45,344,716 46,201,078
29
166,500,000 166,500,000 166,500,000 166,500,000 2,105,495,759 1,959,392,299 1,881,851,889 1,755,285,056 6,119,587,903 5,974,340,805 5,895,944,033 5,770,233,562 2,216,301 2,130,088 6,121,804,204 5,976,470,893 5,895,944,033 5,770,233,562 9,342,143,320 9,330,546,074 8,718,853,405 8,755,767,129
The accompanying notes are an integral part of the financial statements.
.........................................Chairman (Mr. Utid Tamwatin)
44
Annual Report 2008 (October - December 2008)
........................................President & CEO (Mr. Praphant Asava-aree)
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Statements of income Eastern Water Resources Development and Management Public Company Limited and its subsidiaries For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008
Note
Revenues Sales - raw water Sales - tap water Sales - others Total sales Service income Interest and dividend income Gain on disposal of investment in a subsidiary Other income Total revenues Expenses Costs of sales - raw water Costs of sales - tap water Costs of sales - others Total costs of sales Costs of services Selling and servicing expenses Administrative expenses Expenses for development of life quality and environment Directors remuneration Losses on impairment and diminution in value of assets and provision for doubtful accounts Loss on disposal of investment in a subsidiary Loss on impairment of investment in a subsidiary Total expenses Earnings before finance cost and income tax Finance cost Earnings before income tax Income tax Net income Net income attributable to Equity holders of the parent Minority shareholders of the subsidiaries Earnings per share Basic earnings per share Net income attributable to equity holders of the parent
8.1 8.1 8.1 8.1 8.1 17 8.1
8.1
32
17
8.1 34
(Unit: Baht) Consolidated financial statements Separate financial statements For the period For the period as from as from 1 October 2008 to For the year ended 1 October 2008 to For the year ended 31 December 2008 30 September 2008 31 December 2008 30 September 2008
393,113,532 1,672,600,765 144,744,079 541,146,087 195,389 21,964,344 538,053,000 2,235,711,196 73,443,136 143,215,424 19,754,990 44,788,510 3,478,650 3,058,518 10,059,514 634,309,644 2,437,253,294
418,924,267 1,752,720,341 50,769,761 185,922,203 207,748 2,092,004 469,901,776 1,940,734,548 8,500,634 17,120,727 23,618,865 88,769,730 2,296,492 3,847,012 504,317,767 2,050,472,017
177,140,624 74,154,594 379,566 251,674,784 64,620,400 6,953,276 50,350,234 3,609,457 5,750,291
712,598,816 243,919,959 19,985,349 976,504,124 152,938,780 44,563,351 290,549,347 17,309,812 36,142,884
177,624,681 50,512,612 375,407 228,512,700 5,999,400 6,457,226 40,190,669 2,310,050 3,450,500
714,482,327 183,946,145 2,321,827 900,750,299 18,036,144 42,105,226 191,061,605 16,669,405 23,050,080
17,167,141 35,770,685 400,125,583 1,553,778,983 234,184,061 883,474,311 (34,459,101) (165,935,810) 199,724,960 717,538,501 (53,535,287) (180,812,542) 146,189,673 536,725,959
16,894,136 303,814,681 200,503,086 (30,879,849) 169,623,237 (43,056,404) 126,566,833
34,344,932 16,707,231 18,000,000 1,260,724,922 789,747,095 (135,437,159) 654,309,936 (135,632,286) 518,677,650
146,103,460 86,213 146,189,673 35
571,491,170 (34,765,211) 536,725,959
126,566,833
518,677,650
0.09
0.35
0.08
0.32
The accompanying notes are an integral part of the financial statements. BACK TO CONTENT
Annual Report 2008 (October - December 2008)
45
Statements of changes in shareholders’ equity Eastern Water Resources Development and Management Public Company Limited and its subsidiaries For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008
(Unit: Baht) Consolidated financial statements Equity attributable to the Company s shareholders Issued and Share subscription fully paid-up received in share capital advance
Note Balance as at 30 September 2007
1,346,394,130 113,395,120
Share premium
Total equity Retained earnings Assets atributable to transferred Appropriated the Company s from customers statutory reserve Unappropriated shareholders
Minority interestsequity attributable to minority shareholders of subsidiaries
Total
42,792,299
4,709,857,238
1,187,358,422
49,598,601
166,500,000
-
-
(3,397,523)
-
-
(3,397,523)
-
(3,397,523)
-
951,163,857
-
-
-
1,268,494,876
-
1,268,494,876
-
(113,395,120)
-
-
-
-
(113,395,120)
-
(113,395,120)
-
-
-
-
-
(415,917,537)
(415,917,537)
(140,015)
(416,057,552)
Net income
-
-
-
-
-
571,491,170
571,491,170
(34,765,211)
536,725,959
Decrease in minority interest of a subsidiary
-
-
-
-
-
-
-
(5,756,985)
(5,756,985)
1,663,725,149
-
2,138,522,279
46,201,078
166,500,000
2,130,088
5,976,470,893
-
-
(856,362)
-
-
(856,362)
-
(856,362)
-
-
-
-
-
146,103,460
146,103,460
86,213
146,189,673
1,663,725,149
-
2,138,522,279
45,344,716
2,216,301
6,121,804,204
Amortisation of assets transferred from customers
-
Increase in share capital from exercised warrants
317,331,019
1,803,818,666 4,667,064,939
Share subscription received in advance as a result of warrant exercises Dividends paid
Balance as at 30 September 2008
30
Amortisation of assets transferred from customers
-
Net income Balance as at 31 December 2008
The accompanying notes are an integral part of the financial statements.
46
Annual Report 2008 (October - December 2008)
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1,959,392,299 5,974,340,805
166,500,000 2,105,495,759
6,119,587,903
Statements of changes in shareholders’ equity (continued) Eastern Water Resources Development and Management Public Company Limited and its subsidiaries For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008
(Unit: Baht) Separate financial statements Issued and Share subscription fully paid-up received in Note
Assets transferred
Share
Retained earnings Appropriated -
share capital
advance
premium
1,346,394,130
113,395,120
1,187,358,422
49,598,601
166,500,000
1,652,524,943
4,515,771,216
Amortisation of assets transferred from customers
-
-
-
(3,397,523)
-
-
(3,397,523)
Increase in share capital from exercised warrants
317,331,019
-
951,163,857
-
-
-
1,268,494,876
-
(113,395,120)
-
-
-
-
(113,395,120)
-
-
-
-
-
(415,917,537)
(415,917,537)
-
-
-
-
-
518,677,650
518,677,650
1,663,725,149
-
2,138,522,279
46,201,078
166,500,000
1,755,285,056
5,770,233,562
Amortisation of assets transferred from customers
-
-
-
(856,362)
-
-
(856,362)
Net income
-
-
-
-
-
126,566,833
126,566,833
1,663,725,149
-
2,138,522,279
45,344,716
166,500,000
1,881,851,889
5,895,944,033
Balance as at 30 September 2007
from customers statutory reserve Unappropriated
Total
Share subscription received in advance as a result of warrant exercises Dividends paid
30
Net income Balance as at 30 September 2008
Balance as at 31 December 2008
The accompanying notes are an integral part of the financial statements.
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Annual Report 2008 (October - December 2008)
47
Statements of cash flows Eastern Water Resources Development and Management Public Company Limited and its subsidiaries For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008
(Unit: Baht) Consolidated financial statements Separate financial statements For the period For the period as from as from 1 October 2008 to For the year ended 1 October 2008 to For the year ended 31 December 2008 30 September 2008 31 December 2008 30 September 2008
Cash flows from operating activities Earnings before tax Adjustments to reconcile earnings before income tax to net cash provided by (paid from) operating activities: Loss on impairment of investment in a subsidiary (Gain) loss on disposal of investment in a subsidiary Losses on impairment of fixed assets Losses on impairment of other assets Losses on diminution in value of inventories Provision for doubtful accounts Depreciation Amortisation of assets under concession contracts Amortisation of deferred concession rights acquisition costs Amortisation of assets transferred from customers (Gains) losses on disposals of fixed assets Losses on fixed assets written off Amortisation of deferred interest under finance lease agreements Amortisation of rights Dividend income Interest income Interest expenses Income from operating activities before changes in operating assets and liabilities (Increase) decrease in operating assets Trade accounts receivable Unbilled receivables Service income receivable - related party Inventories Input taxes awaiting refund Other current assets Other receivables - related parties Other non-current assets Increase (decrease) in operating liabilities Trade accounts payable Accrued expenses Advances received Other current liabilities - related parties Other non-current liabilities Cash provided by operating activities Cash paid for interest expenses Cash paid for income tax Net cash provided by operating activities
199,724,960
717,538,501
274,018 715,585 7,722,208 8,455,330 72,541,714 6,218,328 5,078,715 (856,362) 1,904
(3,478,650) 236,021 1,592,215 20,980,272 14,277,653 292,951,074 24,574,830 14,509,565 (3,397,523) 1,982,528 11,488,487
18,000,000 16,707,231 715,585 1,192,148 7,678,551 20,190,607 8,500,000 12,962,177 67,594,543 246,770,158 (856,362) (3,397,523) 11,077,943
119,385 2,104,339 (16,175,909) (3,579,082) 34,396,182
470,863 8,348,738 (40,171,592) (4,616,922) 165,935,810
77,990 (16,175,909) (7,442,957) 30,816,930
316,741,315 1,223,221,870 22,164,246 (5,824,946) (22,957,980) 8,836 (334,958) 7,808,120 4,430 (272,916)
Annual Report 2008 (October - December 2008)
654,309,936
256,712 (68,221,592) (20,548,138) 135,632,286
260,531,608 1,024,931,945
5,640,404 (1,446,200) (426,883) 602,744 1,737,043 5,331,559 (14,241,010) 762,187
2,018,167 382,622 6,010,568 2,098,254 -
(17,643,746) 2,321,827 (9,110,404) 8,545,369 641,590
(5,564,498) (27,723,905) (29,537,258) 47,412,741 16,937,827 (1,768,283) (5,114,994) 6,107,865 (589,248) 15,827,506 293,467,976 1,261,037,638 (24,946,454) (176,670,193) (8,034,214) (158,721,094) 260,487,308 925,646,351
90,156 (28,184,709) (12,255,032) 1,104,237 231,795,871 (20,986,983) (3,394,540) 207,414,348
329,882 37,004,619 17,592,659 17,057,570 1,081,671,311 (168,713,984) (111,542,710) 801,414,617
The accompanying notes are an integral part of the financial statements. Cash flows from investing activities 48
169,623,237
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Statements of cash flows (continued) Eastern Water Resources Development and Management Public Company Limited and its subsidiaries For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008
(Unit: Baht) Consolidated financial statements Separate financial statements For the period For the period as from as from 1 October 2008 to For the year ended 1 October 2008 to For the year ended 31 December 2008 30 September 2008 31 December 2008 30 September 2008
Securities purchased under resale agreement Increase in current investments Cash receipt from repayment of long term loan to an unrelated party Proceeds from disposal of investment in a subsidiary Dividend received from a subsidiary Dividend received from a related party Decrease in advance payments for pipeline installation Capital returned from a joint venture Increase in assets under concession contracts Increase in deferred concession rights acquisition costs Interest income Proceeds from disposals of fixed assets Proceeds from disposals of other assets Cash paid for purchases of fixed assets Net cash used in investing activities Cash flows from financing activities Increase (decrease) in bank overdrafts Repayment of short-term loans from financial institutions Cash receipt from short-term loans from financial institutions Repayment made on debentures Cash receipt from long-term loans from financial institutions Repayment made on long-term loans from financial institutions Repayment made on liabilities under finance lease agreements Increase in share capital from excercised warrants Dividends paid Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the periods Less: Cash and cash equivalents of the disposed subsidiary on the disposal date Cash and cash equivalents at ending of the periods
(176,010,051) (85,000,000) (176,010,051) (85,000,000) 59,937,428 (130,271,367) 59,937,428 (130,271,367) 300,000 200,000 300,000 200,000 12,000,000 12,000,000 14,025,000 70,023,000 8,087,955 40,171,592 8,087,955 40,171,592 81,427 81,427 400,000 (3,779,762) (22,477,457) (20,260,737) (155,512,898) 2,523,672 4,617,528 6,387,098 20,548,744 12,322,234 156,000 156,000 (25,100,942) (197,446,449) (22,996,817) (172,619,618) (154,302,437) (520,759,390) (110,269,387) (244,710,222) (20,009,842) 20,009,842 (20,009,842) 20,009,842 (52,000,000) (2,600,000,000) - (2,600,000,000) 7,500,000 2,552,000,000 - 2,500,000,000 - (2,500,000,000) - (2,500,000,000) 52,500,000 1,576,700,000 - 1,500,000,000 (161,429,000) (344,287,000) (150,000,000) (310,000,000) (874,095) (2,813,402) (566,409) (1,582,658) - 1,155,099,756 - 1,155,099,756 - (416,057,551) - (415,917,537) (174,312,937) (559,348,355) (170,576,251) (652,390,597) (68,128,066) (154,461,394) (73,431,290) (95,686,202) 170,193,618 337,436,339 128,549,012 224,235,214 102,065,552
(12,781,327) 170,193,618
55,117,722
128,549,012
9,374,857
(91,490,656)
(2,372,397)
75,708,133
-
10,000,000
-
10,000,000
-
8,243,275
-
5,981,880
Supplemental cash flow information Non-cash related transactions: Net increase (decrease) in acquisition assets on credit Reclassification from long-term investments to shot-term investments Net increase in acquisitions of assets under finance lease agreements The accompanying notes are an integral part of the financial statements. BACK TO CONTENT
Annual Report 2008 (October - December 2008)
49
Notes to financial statements Eastern Water Resources Development and Management Public Company Limited and its subsidiaries For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008
1.
General information
1.1
The Company information Eastern Water Resources Development and Management Public Company Limited ( the Company ) is a public limited company incorporated and domiciled in Thailand. The major shareholder of the Company is the Provincial Waterworks Authority. The Company is principally engaged 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 address of the Company is located at 23rd - 26th Floors, East Water Building, No. 1 Soi Vipavadeerangsit 5, Vipavadeerangsit Road, Jomphol Sub-district, Chatujak District, Bangkok.
1.2
The subsidiaries information As at 31 December 2008 and 30 September 2008, the Company had 5 subsidiaries, which are under held directly and indirectly by the Company as follow: Universal Utilities Company Limited Universal Utilities Company Limited ( the subsidiary ) was incorporated as a limited company under Thai laws and is a wholly-owned subsidiary of Eastern Water Resources Development and Management Public Company Limited, a public company listed on the Stock Exchange of Thailand. The subsidiary operates its business in Thailand and its principle activity is operating an integrated water-related business, which comprises (a) waterworks management including production and supply of tap water, (b) providing customer services such as meter reading and billing, and (c) providing engineering services such as design, installation, maintenance, tap water business-related technology development and wastewater & water quality testing laboratory. The subsidiary s registered address is located at No. 1, the 23rd to 25th Floors of East Water Building, Soi Vipavadeerangsit 5, Vipavadeerangsit Road, Jomphol Sub-district, Jatujak District, Bangkok. Chachoengsao Water Supply Company Limited Chachoengsao Water Supply Company Limited ( the subsidiary ) was incorporated as a limited company under Thai laws on 19 October 2000. Its parent company is Universal Utilities Company Limited, a limited company under Thai laws and its ultimate parent company is Eastern Water Resources Development and Management Public Company Limited, a public company listed on the Stock Exchange of Thailand. The subsidiary is domiciled in Thailand and its principal activity is the production and supply of tap water to Provincial
50
Annual Report 2008 (October - December 2008)
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Waterworks Authority. According to the concession contract dated 9 November 2000, the subsidiary is privileged to produce and supply tap water to the Provincial Waterworks Authority at Chachoengsao Office in Chachoengsao province. The concession period is 25 years from the first date that income is derived from selling tap water under the condition specified in the contract, which is on 1 April 2003. The subsidiary s registered address is located at No. 1, the 23rd to the 25th floors of East Water Building, Soi Vipavadeerangsit 5, Vipavadeerangsit Road, Jomphol Sub-district, Jatujak District, Bangkok. Bangpakong Water Supply Company Limited Bangpakong Water Supply Company Limited ( the subsidiary ) was incorporated as a limited company under Thai laws on 19 October 2000. Its parent company is Universal Utilities Company Limited, a limited company under Thai laws and its ultimate parent company is Eastern Water Resources Development and Management Public Company Limited, a public company listed on the Stock Exchange of Thailand. The subsidiary is domiciled in Thailand and its principal activity is the production and supply of tap water to Provincial Waterworks Authority. According to the concession contract dated 9 November 2000, the subsidiary is privileged to produce and supply tap water to the Provincial Waterworks Authority at Bangpakong Office in Chachoengsao province. The concession period is 25 years from the first date that income is derived from selling tap water under the condition specified in the contract, which is on 1 April 2003. The subsidiary s registered address is located at No. 1, the 23rd to the 25th Floors of East Water Building, Soi Vipavadeerangsit 5, Vipavadeerangsit Road, Jomphol Sub-district, Jatujak District, Bangkok. Nakornsawan Water Supply Company Limited Nakornsawan Water Supply Company Limited ( the subsidiary ) was incorporated as a limited company under Thai laws on 19 October 2000. Its parent company is Universal Utilities Company Limited, a limited company under Thai laws and its ultimate parent company is Eastern Water Resources Development and Management Public Company Limited, a public company listed on the Stock Exchange of Thailand. The subsidiary is domiciled in Thailand and its principal activity is the production and supply of tap water to Provincial Waterworks Authority. According to the concession contract dated 7 November 2000, the subsidiary is privileged to produce and supply tap water to the Provincial Waterworks Authority at Nakornsawan Aok Office in Nakornsawan province. The concession period is 25 years from the first date that income is derived from selling tap water under the condition specified in the contract, which is on 1 March 2003. The subsidiary s registered address is located at No. 1, the 23rd to the 25th Floors of East Water Building, Soi Vipavadeerangsit 5, Vipavadeerangsit Road, Jomphol Sub-district, Jatujak District, Bangkok. Water Trades and Services Company Limited Water Trades and Services Company Limited ( the subsidiary ) was incorporated as a limited company under Thai laws on 6 June 2007. Its parent company is Eastern Water Resources Development and Management Public Company Limited, a Thai incorporated public company listed on the Stock Exchange of Thailand. The subsidiary operates its business in Thailand and is principally engaged in (a) sales of water vending machines (b) sales of chemicals used in tap water production process and (c) management service of water vending machines. Its registered address is at 24th Floor, East Water Building, No. 1, Soi Vipavadeerangsit 5, Vipavadeerangsit Road, Jomphol Sub-district, Chatujak District, Bangkok. BACK TO CONTENT
Annual Report 2008 (October - December 2008)
51
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 and their presentation 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 where otherwise disclosed in Note 6 to the financial statements regarding significant accounting policies. The separate financial statements, which present investments in subsidiaries under the cost method, have been prepared solely for the benefit of the public. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from such financial statements in Thai language. On 6 March 2008, the Company was approved by the Chief Accounts Inspector of Department of Business Development with respect to the change in its fiscal year end from 30 September to 31 December, and on 9 June 2008, it was also approved by the Revenue Department with the effect from the fiscal period ending 31 December 2008 onwards. Therefore, the financial statements for the current period presented financial information for the three-month period as from 1 October 2008 to 31 December 2008.
3.
Basis of consolidation (a)
These consolidated financial statements include the financial statements for the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008 of Eastern Water Resources Development and Management Public Company Limited ( the Company ) and the following subsidiaries, except for the exclusion of balance sheet as at 30 September 2008 of Eastern Hobas Pipes Company Limited from the consolidated balance sheet and the inclusion of the statement of income of such company for the period ended only up to 31 March 2008 in the consolidated statement of income for the year ended 30 September 2008, since the Company disposed investment in that company on 31 March 2008, as described in Note 17 to the financial statements.
Subsidiaries Subsidiaries held directly by the Company Universal Utilities Company Limited
Water Trades and Services Company Limited
52
Country of incorporation
Thailand
Thailand
Annual Report 2008 (October - December 2008)
Nature of business
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 Sale of water vending machines and chemical for producing tap water
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Percentage of shares heldby the Company Paid up share capital or its subsidiary 31 30 31 30 December September December September 2008 2008 2008 2008 Million Baht Million Baht Percent Percent
510
510
100
100
5
5
100
100
Subsidiaries
Country of incorporation
Percentage of shares heldby the Company Paid up share capital or its subsidiary 31 30 31 30 December September December September 2008 2008 2008 2008 Million Baht Million Baht Percent Percent
Nature of business
Subsidiaries held by Universal Utilities Company Limited Chachoengsao Water Supply Thailand Production and supply of Company Limited tap water Bangpakong Water Supply Thailand Production and supply of Company Limited tap water Nakornsawan Water Thailand Production and supply of tap water Supply Company Limited
4.
100
100
99
99
40
40
99
99
40
40
100
100
b)
Subsidiaries are fully consolidated as from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases.
c)
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent significant accounting policies.
d)
Material balances and transactions between the Company and its subsidiaries, have been eliminated from the consolidated financial statements. Investments in the subsidiaries as recorded in the Company s books of account are eliminated against the equity of the subsidiaries. The resultant differences are rights, which will be amortised over a period of 27 years, being the remaining concession period awarded to subsidiaries, commencing as from the date of acquisition of shares in the subsidiaries.
e)
Minority interests represent the portion of the net income or loss and net assets of the subsidiaries that are not held by the Company and are presented separately in the consolidated statements of income and within equity in the consolidated balance sheet, separately from shareholders equity of the parent company.
Adoption of new accounting standards The Federation of Accounting Professions has issued Notifications No. 9/2550, 38/2550, 62/2550 and 86/2551 regarding Thai Accounting Standards ( TAS ). The Notifications mandate the use of the following new accounting standards. 4.1
Accounting standards which are effective for the current period TAS 25 (revised 2007) TAS 29 (revised 2007) TAS 31 (revised 2007) TAS 33 (revised 2007) TAS 35 (revised 2007) TAS 39 (revised 2007) TAS 41 (revised 2007) TAS 43 (revised 2007) TAS 49 (revised 2007) TAS 51
Cash Flow Statements Leases Inventories Borrowing Costs Presentation of Financial Statements Accounting Policies, Changes in Accounting Estimates and Errors Interim Financial Reporting Business Combinations Construction Contracts Intangible Assets
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Annual Report 2008 (October - December 2008)
53
These accounting standards became effective for the financial statements for fiscal years beginning on or after 1 January 2008. The Company s management has assessed the effect of these standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied. 4.2
Accounting standards which are not effective for the current period TAS 36 (revised 2007) TAS 54 (revised 2007)
Impairment of Assets Non-current Assets Held for Sale and Discontinued Operations
These accounting standards will become effective for the financial statements for fiscal years beginning on or after 1 January 2009. The management has assessed the effect of these accounting standards and believes that TAS 36 (revised 2007) does not have any significant impact on the financial statements for the year in which it is initially applied, while TAS 54 (revised 2007) is not relevant to the business of the Company and its subsidiaries since the Company and its subsidiaries do not have non-current assets held for sale and there is no plan to discontinue any of their operations. 5.
Change in accounting estimation During the period as from 1 October 2008 to 31 December 2008, the Company reviewed useful lives of assets and changed the estimated useful lives from 30 years previously estimated for every raw water distribution pipelines and from 25 years previously estimated for Nong Pla Lai - Map Ta Pud water distritbution pipeline to 40 years for all those pipelines in order to reflect its current condition and useful lives. The change has the effect of increasing net income in the Company s consolidated and separate statements of income for the period as from 1 October 2008 to 31 December 2008 by Baht 3.7 million.
6.
Significant accounting policies Significant accounting policies adopted by the Company and its subsidiaries are summarised below.
6.1
Revenue recognition (a)
Sales Sales of goods are recognised as revenue when significant risks and reward of ownership of goods have passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after deducting goods returns and discounts.
(b)
Service income Service income is recognised by the amount excluding value added tax when service has been rendered with reference to the stage of completion.
(c)
Revenue from pipeline installation project and water loss reduction project Revenue from water pipeline installation project and water loss reduction project are recognised as revenue under the percentage of completion method. The expected loss on unprofitable contracts is recognised as soon as such loss can be foreseen.
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Annual Report 2008 (October - December 2008)
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(d)
Interest and dividend income Interest income is recognised on an accrual basis. Dividend income is recognised when rights to receive dividends are established.
(e)
Other income Other income is recognised on an accrual basis.
6.2
Cash and cash equivalents Cash and cash equivalents consist of cash in hand, cash at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions.
6.3
Securities purchased under resale agreement The Company enters into agreements to purchase securities under condition to resell at certain dates in the future at fixed prices. Amounts paid for securities purchased subject to a resale commitment are presented as assets under the caption of Securities purchased under resale agreements in the balance sheets. The differences between the purchase and sale considerations is recognised as interest income on an accrual basis over the agreement periods.
6.4
Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables, which is generally based on collection experience and analysis of debt aging.
6.5
Unbilled receivables/unbilled service income receivable The Company and its subsidiaries record revenue from sales of tap water and service income that has been recognised as revenue but not yet billed to the customers under the caption of Unbilled receivables and Unbilled service income receivable - related party , which have been shown as current assets in the balance sheets
6.6
Inventories Inventories are valued at the lower of cost (specific identification method for water vending machines and firstin, first out method for other inventories) and net realisable value. Allowance for diminution in value of inventories is set up for obsolete, slow-moving or deteriorated inventories.
6.7
Investments Investments in subsidiaries in the separate financial statements are accounted for under the cost method and less allowance for impairment (if any). Investments in held-to-maturity debt securities, classified as current investments or long-term investment in accordance with their remaining periods to maturity, are stated at amortised cost less allowance for impairment (if any). The premium/discount on debt securities is amortised using the straight-line method with the amortised amount included in statements of income. BACK TO CONTENT
Annual Report 2008 (October - December 2008)
55
Investments in non-marketable equity securities held as general investments are determined at costs less allowance for impairment (if any). Loss on impairment (if any) of investments is included in the statements of income. 6.8
Property, plant and equipment and depreciation Land is stated at cost less allowance for impairment (if any). Plant and equipment are stated at cost less accumulated depreciation and allowance for impairment (if any). Depreciation of plant and equipment are computed using the straight-line method over their estimated useful lives (except for water distribution pipelines in Chachoengsao, Bangpakong-Chonburi, Sriracha, Bangpra, Rayong-Mabkha and Nakhornnuengkhet which are depreciated by the units of production method). Estimated useful lives are as follows: Pumping plant Other buildings Land, building and leasehold improvements Machinery and equipment (Except for pipelines in Chachoengsao, Bangpakong-Chonburi, Sriracha, Bangpra, Rayong-Mabkha and Nakhornnuengkhet, which are depreciated by the units of production method based on projected sales volume in unit but not exceeding the capacity of assets over a 40-year period) Office equipment Vehicles
33 years 15, 20, 25 years 5, 10, 15, 20 years
5, 10, 20, 25, 40 years 3, 5, 10 years 5 years
No depreciation is provided for land and construction in progress. Depreciation is included in statements of income. 6.9
Assets under concession contracts and amortisation Assets under concession contracts are stated at cost less accumulated amortisation and allowance for impairment (if any). Amortisation of assets under concession contracts, which has been computed using the straight-line method over the concession period of 15, 20 and 25 years, has been included in statements of income.
6.10 Deferred concession rights acquisition costs and amortisation Concession rights acquisition costs consist of expenses incurred directly in relation to obtaining the concession contracts from the Provincial Waterworks Authority. Deferred concession rights acquisition costs are stated at cost less accumulated amortisation and allowance for impairment (if any). Amortisation of deferred concession rights acquisition costs, which has been computed using the straight-line method over the concession periods of 27 and 30 years, has been included in statements of income.
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Annual Report 2008 (October - December 2008)
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6.11 Borrowing costs Borrowing costs directly attributable to the acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they are incurred. Borrowing costs consist of interest and other costs that the Company and its subsidiaries incur in connection with the borrowing of funds. 6.12 Intangible assets and amortisation Intangible assets presented as an asset in the consolidated balance sheets are rights to operate the subsidiaries businesses under concession awarded to the subsidiaries by the government unit or entity over a limited a concession period. Rights are stated at cost less accumulated amortisation and allowance for impairment (if any) and are amortised using the straight-line method over a period of 27 years, being the concession period awarded to the subsidiaries to carry out their business operation. The carrying amounts of intangible assets are reviewed annually and written down when there is an impairment. 6.13 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 indication exists, or when annual impairment testing for an asset is required, the Company and its subsidiaries estimate the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, the Company and its subsidiaries assess the value that reflects the amount that the Company could obtain at the balance sheet date, from the disposal of the asset in an arm s length transaction between knowledgeable and willing parties, after deducting the costs of disposal. 6.14 Provisions Provisions are recognised when the Company and its subsidiaries have a present obligation as a result of a part event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of such obligation can be made. 6.15 Long-term leases Leases of property, plant or equipment which transfer substantially all the risks and rewards of ownership to the leasee are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are recorded as long-term liabilities while the interest element is charged to the statements of income over the lease periods. The assets acquired under finance lease is depreciated over the shorter of the useful life of the asset or the lease period.
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Annual Report 2008 (October - December 2008)
57
6.16 Employee benefits The Company, its subsidiaries and their 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 its directors and employees the warrants to purchase the Company s ordinary shares. Such transactions are recorded in the financial statements when the warrants are exercised. 6.17 Foreign currencies Transactions in foreign currency are translated into Baht at the exchange rates ruling on the dates of transaction. Monetary assets and liabilities denominated in foreign currencies outstanding on the balance sheet dates are translated into Baht at the exchange rates ruling on the balance sheet dates. Gains and losses on exchange are included in statements of income. 6.18 Income tax Income tax is provided in the accounts based on the taxable profits determined in accordance with tax legislation. 6.19 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company and its subsidiaries, whether directly or indirectly, or which are under common control with the Company and its subsidiaries. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company and its subsidiaries that gives them significant influence over them, key management personnel, directors and officers with authority in the planning and direction of the Company s and its subsidiaries operations, together with close family members of such persons and companies which are controlled or influenced by them, whether directly or indirectly. 7.
Significant accounting judgments and estimates The preparation of financial statements in conformity with generally accepted accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures and actual results could differ. Significant accounting judgments and estimates are as follows:
7.1
Value in use Value in use is the present value of the future cash flows expected to be derived from assets, discounted by discount rates, determined by the management of the Company and its subsidiaries. The cash flow projections based on financial forecasts for the remaining useful lives of assets or concession periods and approved by the management of the Company and its subsidiaries are calculated based on estimated growth rates, which do not exceed their capacity and customers usage demand. Key assumptions used for value-in-use calculations are growth rates, expense to revenue ratios and gross margin rate. Management determines such rates based
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Annual Report 2008 (October - December 2008)
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on their past performance, their expectations for market development, and business plan. The discount rates used are pre-tax and reflect specific risks relating to the business. The value derived from the afore-mentioned method may vary due to changes in revenue structure, cost structure, discount rate, industrial conditions and economic conditions. 7.2
Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgement regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement.
7.3
Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgement and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition.
7.4
Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and salvage values of the plant and equipment and to review estimate useful lives and salvage values when there are any changes.
7.5
Intangible assets The initial recognition and measurement of intangible asset, and subsequent impairment testing, require management to make estimates of cash flows to be generated by the asset or the cash generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows.
7.6
Litigation The Company and its subsidiary have contingent liabilities as a result of litigation. Their management has used judgment to assess of the results of the litigation and believe that no loss will result. Therefore no contingent liabilities are recorded as at the balance sheet dates. However, actual results could differ from the estimates.
7.7
Fair value of financial instruments In determining the fair value of financial instruments that are not actively traded and for which quoted market prices are not readily available, the management exercises judgment in estimating fair value as follows: The fair value of long-term loan to a related party is estimated by discounting the cash flows expected to be received by the Company from repayments of that loan by the current market interest rates. The fair value of long-term loans from financial institutions are estimated by discounting the cash flows expected to be used to repay principal and interest to the lenders by the Company and its subsidiaries by the current market interest rates.
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Annual Report 2008 (October - December 2008)
59
8.
Related party transactions
8.1
Transactions incurred during the period During the periods, the Company and its subsidiaries had significant business transactions with related parties. Such transactions, which are summarised below, arose in the ordinary course of business and were concluded on commercial terms and bases agreed upon between the Company and those related parties.
Type of relationship
Consolidated Separate financial statements financial statements For the period For the period as from as from 1 October For the year 1 October For the year 2008 to ended 2008 to ended 31 December 30 September 31 December 30 September 2008 2008 2008 2008
Sales - raw water Industrial Estate Authority Major shareholder of Thailand
Provincial Waterworks Authority
Major shareholder
Universal Utilities Subsidiary Company Limited Sales - tap water Provincial Waterworks Authority
-
Major shareholder
Sales - others Water Trades and Services Subsidiary Company Limited Universal Utilities Subsidiary Company Limited
60
141,132
611,659
141,132
611,659
121,953
463,452
121,953
463,452
-
25,811
80,120
263,085
1,075,111
288,896
1,155,231
93,974
355,224
-
-
-
-
-
1,293
-
27
75
-
-
27
1,368
Service income Provincial Waterworks Authority
Major shareholder
49,690
74,501
-
-
Egcom Tara Company Limited
Having a common shareholder
9,345
31,442
-
-
59,035
105,943
-
-
Annual Report 2008 (October - December 2008)
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(Unit: Thousand Baht) Transfer pricing policy For the period as from 1 October For the year 2008 to ended 31 December 31 December 2008 2008 Similar to market prices and adjusted for rate reduced in accordance with a resolution of the Extraordinary General Meeting No. 2/2551 Similar to market prices and adjusted for rate reduced in accordance with a resolution of the Extraordinary General Meeting No. 2/2551 Similar to market prices
Similar to market prices and adjusted for rate reduced in accordance with a resolution of the Extraordinary General Meeting No. 2/2551 Similar to market prices and adjusted for rate reduced in accordance with a resolution of the Extraordinary General Meeting No. 2/2551 Similar to market prices
Mutually agreed Mutually agreed price as stipulated price as stipulated in the contracts in the contracts Similar to market prices
Similar to market prices Similar to market prices
Mutually agreed price as stipulated in the contracts Mutually agreed price as stipulated in the contracts
Mutually agreed price as stipulated in the contracts Mutually agreed price as stipulated in the contracts
Type of relationship Rental and service income (included in service income) Universal Utilities Company Limited
Water Trades and Services Company Limited
Subsidiary
-
-
662
2,434
Subsidiary
-
-
99
362
-
-
761
2,796
-
-
3,969
43,843
-
-
-
587
16,176
40,172
16,176
40,172
16,176
40,172
20,145
84,602
Subsidiary
-
-
1,289
1,086
Subsidiary
-
-
-
221
-
-
1,289
1,307
Subsidiary
-
-
51,439
199,191
Subsidiary
-
-
78
2,992
-
-
51,517
202,183
-
391
-
-
Interest and dividend income Universal Utilities Subsidiary Company Limited
Eastern Hobas Pipes Company Limited Egcom Tara Company Limited
Other income Universal Utilities Company Limited Eastern Hobas Pipes Company Limited
Service expenses (included in cost of sales) Universal Utilities Company Limited Water Trades and Services Company Limited
Interest expense Hobas Engineering GmbH
Subsidiary Having a common shareholder
Shareholder of a subsidiary
(Unit: Thousand Baht) Transfer pricing policy For the period as from 1 October For the year 2008 to ended 31 December 31 December 2008 2008
Consolidated Separate financial statements financial statements For the period For the period as from as from 1 October For the year 1 October For the year 2008 to ended 2008 to ended 31 December 30 September 31 December 30 September 2008 2008 2008 2008
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Mutually agreed price as stipulated in the contracts Mutually agreed price as stipulated in the contracts
Mutually agreed price as stipulated in the contracts
5.25% per annum on loans to subsidiary
5.25% per annum on loans to subsidiary and dividend of Baht 0.55 per share as declared by the subsidiary 6.50% per annum
-
price as stipulated in the contracts
Baht 3.12 per share Baht 7.76 per share as declared by as declared by such company such company
Mutually agreed Mutually agreed price as stipulated price as stipulated in the contracts in the contracts Mutually agreed price as stipulated in the contracts
Mutually agreed Mutually agreed price as stipulated price as stipulated in the contracts in the contracts Mutually agreed Mutually agreed price as stipulated price as stipulated in the contracts in the contracts
-
6.5% per annum
Annual Report 2008 (October - December 2008)
61
8.2
Outstanding balances at end of the years The outstanding balances the Company and its subsidiaries have with their related parties and/or persons as at 31 December 2008 and 30 September 2008 are detailed as follow: Consolidated financial statements 31 December 30 September 2008 2008 Trade accounts receivable - related parties Major shareholders Provincial Waterworks Authority 55,852,553 Industrial Estate Authority of Thailand 50,415,307 Subsidiary (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Related company Egcom Tara Company Limited 6,348,108 Total trade accounts receivable - related parties 112,615,968
52,981,303 52,739,145
55,852,553 50,415,307
52,973,439 52,739,145
-
9,613,251
9,043,300
3,043,054 108,763,502
115,881,111
114,755,884
Unbilled receivables - related parties Major shareholders Provincial Waterworks Authority Related company Egcom Tara Company Limited Total unbilled receivables - related parties
61,061,349
60,147,229
-
-
1,067,665 62,129,014
60,147,229
-
-
Service income receivables - related party Major shareholder Provincial Waterworks Authority
50,182,252
27,224,272
-
-
-
-
14,025,000
28,050,000
8,087,954 8,087,954
-
8,087,954 22,112,954
28,050,000
Dividend receivable from related parties Subsidiary (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Related company Egcom Tara Company Limited Total dividend receivable from related parties
62
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008
Annual Report 2008 (October - December 2008)
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Consolidated financial statements 31 December 30 September 2008 2008
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008
Other receivable - related parties Major shareholder Provincial Waterworks Authority Subsidiaries (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Water Trades and Services Company Limited Nakornsawan Water Supply Company Limited Bangpakong Water Supply Company Limited Total other receivable - related parties
6,489
10,919
-
-
6,489
10,919
2,764,702 2,000,700 1,700 1,500 4,768,602
2,363,115 4,503,741 6,866,856
Long-term loan to related party Subsidiary (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Total long-term loans to related parties
-
-
300,000,000 300,000,000
300,000,000 300,000,000
3,059,501
-
-
-
5,999,054
6,083,125
1,054,913 4,114,414
5,999,054
6,083,125
Trade accounts payable - related parties Major shareholder Provincial Waterworks Authority 5,387,770 Subsidiary (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Related company Egcom Tara Company Limited 1,610,222 Total trade accounts payable - related parties 6,997,992 Other current liabilities - related parties Major shareholder Industrial Estate Authority of Thailand Subsidiaries (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Water Trades and Services Company Limited Total other current liabilities - related parties
-
5,114,994
-
5,114,994
-
5,114,994
32,305,790 10,700 32,316,490
39,426,033 30,495 44,571,522
Rental guarantees received from related parties Subsidiary (Eliminated from the consolidated financial statements) Universal Utilities Company Limited Water Trades and Services Company Limited Total rental guarantees received from related parties
-
-
662,485 98,753 761,238
662,485 98,753 761,238
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Annual Report 2008 (October - December 2008)
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8.3
Movements of inter-company loan Movements of inter-company loan during the period were summarised below. (Unit: Baht) Separate financial statements
Long-term loan to subsidiary Universal Utilities Company Limited
8.4
During the period
Balance as at 30 September 2008
Increase
Repayments
Balance as at 31 December 2008
300,000,000
-
-
300,000,000
Details of agreement of loan to Universal Utilities Company Limited On 3 October 2002, the Company entered into a loan agreement with Universal Utilities Company Limited, a 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 (MLR) per annum thereafter, with such interest payable on a quarterly basis. In order to secure payments under this loan agreement, the Company 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. On 19 June 2007, the Company amended the loan agreement to change the interest rate to be fixed rate of 5.25 percent per annum throughout the remaining term of the loan agreement. The effective date was 1 July 2007. As at 31 December 2008, the Company had an outstanding balance of long-term loan to this subsidiary amounting to approximately Baht 300 million (30 September 2008: Baht 300 million).
8.5
Directors and management s remuneration For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008, the Company and its subsidiaries paid salaries, meeting allowances and gratuities to their directors and management totaling Baht 13.0 million and Baht 65.3 million, respectively (The Company only: Baht 8.7 million and Baht 43.3 million, respectively).
8.6
Guarantee obligations with related parties A subsidiary has obligations as a result of guarantees provided for its related parties, as described in Note 36.4.2 to the financial statements.
9.
Cash and cash equivalents Cash and cash equivalents in the statements of cash flows consisted of cash, cash at banks and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions.
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Annual Report 2008 (October - December 2008)
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Cash Cash at banks - demand deposits Current investment with an original maturity of 3 months or less Cash and cash equivalents
10.
Consolidated financial statements 31 December 30 September 2008 2008 726,231 763,225 101,339,321 79,430,393 90,000,000 102,065,552
170,193,618
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008 199,595 328,195 54,918,127 38,220,817 90,000,000 55,117,722
128,549,012
Securities purchased under resale agreement As at 31 December 2008, the Company had Bank of Thailand bond of Baht 261 million purchased under resale agreement made with a securities company. The reselling date is on 30 January 2009 and interest rate is 2.6 percent per annum (30 September 2008: Baht 85 million, having the reselling date on 22 October 2008 and interest rate of 3.7 percent per annum).
11.
Investments As at 31 December 2008 and 30 September 2008, the investments consisted of the following: Consolidated financial statements 31 December 30 September 2008 2008 Current investments Held-to-maturity debt securities Fixed deposits with banks Promissory notes Total held-to-maturity debt securities Total current investments Long-term investments General investments Non-marketable equity securities Total general investments Total long-term investments Total investments
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008
3,584,275 80,000,000 83,584,275 83,584,275
3,521,703 140,000,000 143,521,703 143,521,703
3,584,275 80,000,000 83,584,275 83,584,275
3,521,703 140,000,000 143,521,703 143,521,703
85,477,500 85,477,500 85,477,500 169,061,775
85,477,500 85,477,500 85,477,500 228,999,203
85,387,500 85,387,500 85,387,500 168,971,775
85,387,500 85,387,500 85,387,500 228,909,203
11.1 As at 31 December 2008 and 30 September 2008, the Company had a long-term investment in equity securities of Egcom Tara Company Limited, a related company. The investment is classified as general investment and stated at cost of Baht 85.4 million and represents 15 percent of the paid-up share capital of that company.
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Annual Report 2008 (October - December 2008)
65
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. On 30 April 2008, the Annual General Meeting of the Shareholders of Egcom Tara Company Limited passed a resolution approving the payment of dividends to its shareholders, approximately Baht 40.2 million of which was for the Company. The Company already received dividends in May and July 2008. On 27 November 2008, the Board of Directors Meeting of Egcom Tara Company Limited passed a resolution approving the payment of dividends to its shareholders, approximately Baht 16.2 million of which was for the Company. The Company already received Baht 8.1 million in December 2008 and the remaining balance will be received in February 2009. 11.2 As at 31 December 2008 and 30 September 2008, a subsidiary had an investment in Joint Venture UUEEI, which is engaged in the maintenance and management of waste water treatment systems. Such investment is classified as general investment and stated at cost of Baht 90,000 which represents 15 percent of paid-up capital of that joint venture. 12.
Trade Accounts Receivable The balances of trade accounts receivable as at 31 December 2008 and 30 September 2008, aged on the basis of due dates, are summarised below.
Trade accounts receivable related parties Not yet due Past due Up to 3 months Total trade accounts receivable related parties Trade accounts receivable - unrelated parties Not yet due Past due Up to 3 months 3 - 6 months 6 - 12 months Over 12 months Total trade accounts receivable - unrelated parties Less: Allowance for doubtful accounts Trade accounts receivable - unrelated parties, net Trade accounts receivable - net
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Annual Report 2008 (October - December 2008)
Consolidated financial statements 31 December 30 September 2008 2008
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008
103,598,627
108,683,252
109,832,206
114,675,634
9,017,341 112,615,968
80,250 108,763,502
6,048,905 115,881,111
80,250 114,755,884
59,731,583
83,935,545
57,976,883
59,441,040
1,497,600 98,552 93,530 7,715,439 69,136,704 (7,669,349) 61,467,355 174,083,323
2,618,260 359,357 415,182 7,825,072 95,153,416 (7,714,019) 87,439,397 196,202,899
1,497,599 98,551 93,530 45,596 59,712,159 59,712,159 175,593,270
2,545,818 266,457 358,982 243,256 62,855,553 62,855,553 177,611,437
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13.
Short-term loan to an unrelated party (Unit: Baht) Separate financial statements 31 December 2008 30 September 2008 Short-term loan to an unrelated party (including accrued interest income) Less: Allowance for doubtful accounts Short-term loan to an unrelated party - net
21,440,649 (21,440,649) -
21,762,177 (12,962,177) 8,800,000
On 13 March 2007, the Company entered into a loan agreement, to provide a credit line of Baht 18 million to Eastern Hobas Pipes Company Limited (former subsidiary) for use as working capital. The Company charges interest to that company at the fixed rate of 6.5 percent per annum, payable on a monthly basis. The loan is repayable within 24 months commencing from the drawn-down date but such company defaulted payments and in the fourth quarter of 2008, the Company sent letter to such company informing it to pay a monthly installment of Baht 100,000 each over the first 6 months and will then restructure such debt. However, such company is sued by a bank, its major creditor and the Company is in the process of suing that company. The Company s management considered setting up an allowance for doubtful accounts in full amount. 14.
Inventories (Unit: Baht) Consolidated financial statements Allowance of diminution in value of inventory Cost
Reduction cost to net realisable value
Stock obsolescence
Inventory-net
31 December 30 September 31 December 30 September 31 December 30 September 31 December 30 September 2008 2008 2008 2008 2008 2008 2008 2008 Finished goods Raw materials and supplies Total
46,939,272 10,389,215 57,328,487
53,457,755 9,632,835 63,090,590
(46,772,084) (44,846,801) (46,772,084) (44,846,801)
(87,412) (87,412)
(43,754) (43,754)
167,188 10,301,803 10,468,991
8,610,954 9,589,081 18,200,035
(Unit: Baht) Consolidated financial statements Allowance of diminution in value of inventory Cost
Reduction cost to net realisable value
Stock obsolescence
Inventory-net
31 December 30 September 31 December 30 September 31 December 30 September 31 December 30 September 2008 2008 2008 2008 2008 2008 2008 2008 Finished goods Raw materials and supplies
46,193,358 -
52,329,251 -
(46,026,170) (44,100,890) -
-
-
167,188 -
8,228,361 -
Total
46,193,358
52,329,251
(46,026,170) (44,100,890)
-
-
167,188
8,228,361
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Annual Report 2008 (October - December 2008)
67
15.
Restricted bank deposits As at 31 December 2008 and 30 September 2008, the Company has pledged fixed deposit accounts with banks amounting to Baht 9.1 million and Baht 9.1 million, respectively to secure bank guarantees obtained from local commercial banks on behalf of the Company and its subsidiaries as described in Note 36.4.1 to the financial statements.
16.
Investments in subsidiaries As at 31 December 2008 and 30 September 2008, the Company recorded its investments in subsidiaries under the cost method, which consisted of investments in ordinary shares in the following subsidiaries: Separate financial statements Investments value Equity interest under cost method
Paid-up share capital
Name of subsidiaries
Water Trades and Services Company Limited Universal Utilities Company Limited Total investment in subsidiaries Less: Allowance for impairment of investments in subsidiaries Investment in subsidiaries - net
17.
Dividends For the period as from 1 October 2008 to For the year 31 ended 30 December September 2008 2008 Thousand Thousand Baht Baht
31 December 2008 Million Baht
30 September 2008 Million Baht
31 December 2008 %
30 September 2008 %
31 December 2008 Thousand Baht
30 September 2008 Thousand Baht
5
5
100
100
5,000
5,000
-
-
510
510
100
100
510,000 515,000
510,000 515,000
-
28,050 28,050
515,000
515,000
Disposal of investment in a subsidiary On 31 March 2008, the Company entered into a share sale and purchase agreement with a local company ( the buyer ) to sell ordinary shares in Eastern Hobas Pipes Company Limited, a subsidiary engaging in the business of manufacture and sale of water distribution pipes whereby the Company agreed to sell 24,000,000 ordinary shares for Baht 0.50 per share, or a total of Baht 12 million ( the selling price ). The buyer paid Baht 2 million on the agreement date and the remainder of Baht 10 million was received on 30 April 2008. In addition, the agreement stipulates that if the subsidiary is successful in reaching a debt restructuring compromise with the local financial institution, the Company will receive additional payment of Baht 12 million. The Company also has an option to buy shares back from the buyer within 18 months from the agreement date, but with the number of shares to be bought back shall not exceed 24 percent of the total issued and paid-up share capital of Eastern Hobas Pipes Company Limited, including any additional share capital registered during the buyback period. The price at which shares are to be bought back is the selling price or the selling price plus the amount that the buyer must additionally pay as a result of an increase in share capital, plus interest at the Minimum Loan Rate (MLR) of Krung Thai Bank applicable on the date the Company applies to buy back the shares.
68
Annual Report 2008 (October - December 2008)
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The net asset value of Eastern Hobas Pipes Company Limited on the selling date (31 March 2008), was as follow: (Unit: Baht) 31 March 2008 Asset Cash and cash equivalents Trade accounts receivable - net Other receivables - related parties Inventories - net Property, plant and equipment - net Other assets Total assets Liabilities Loans from financial institution Loans from shareholders Other liabilities Total liabilities Net asset value Add (less): Adjusting transactions of intercompany sales in prior year Over-recognition of prior year s profit sharing Minority interest - equity attributable to minority shareholders of subsidiaries Equity of the subsidiary attributable to the Company per the consolidated financial statements
12,781,327 53,232,466 18,212,721 15,413,548 380,750,112 3,310,232 483,700,406 297,000,000 30,000,000 114,349,906 441,349,906 42,350,500 (30,836,530) 2,764,364 (5,756,985) 8,521,349
Selling price Less: Equity of the subsidiary attributable to the Company per the consolidated financial statements Gain on disposal of investment in a subsidiary recognised in the consolidated financial statements
12,000,000
Selling price Less: Investment in a subsidiary under cost method on the selling date Loss on disposal of investment in a subsidiary recognised in the separate financial statements
12,000,000 (28,707,000)
(8,521,349) 3,478,651
16,707,000
The Company already received full payment on disposal of such shares on 30 April 2008 and recognised gain of Baht 3.5 million on disposal of investment in a subsidiary in the consolidated financial statements for the year ended 30 September 2008 and loss of Baht 16.7 million on disposal of investment in a subsidiary in the separate financial statements for the year ended 30 September 2008. BACK TO CONTENT
Annual Report 2008 (October - December 2008)
69
The consolidated statements of income and cash flows for the year ended 30 September 2008, categorised by continuing operations and discontinued operations due to disposal of investment in the subsidiary as mentioned above, are shown below. (Unit: Thousand Baht) Consolidated financial statements For the year end 30 September 2008 Continuing Discontinued operations operations (1) Total Revenue Sales Service income Interest and dividend income Gain on disposal of investment in a subsidiary Other income Total revenue Expenses Costs of sales Costs of services Selling, servicing and administrative expenses Total expenses Earning (loss) before interest expense and income tax Interest expense Income tax Earnings (loss) before minority interests (Earnings) loss in respect of minority shareholders of subsidiaries Net income (loss) (1)
70
2,216,825 143,215 44,694 3,479 7,619 2,415,832
18,886 95 2,440 21,421
2,235,711 143,215 44,789 3,479 10,059 2,437,253
959,524 152,939 373,990 1,486,453
16,980 50,346 67,326
976,504 152,939 424,336 1,553,779
929,379 (141,964) (180,812) 606,603
(45,905) (23,972) (69,877)
883,474 (165,936) (180,812) 536,726
(173) 606,430
34,938 (34,939)
34,765 571,491
The amounts shown in the Discontinued operations were presented by the amounts recognised until the date the Company sold its subsidiary (31 March 2008).
Annual Report 2008 (October - December 2008)
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(Unit: Thousand Baht) Consolidated financial statements For the year end 30 September 2008 Continuing Discontinued operations operations (1) Total Cash flows from operating activities Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by (paid from) operating activities: Earnings (loss) in respect of minority shareholders of subsidiaries Gain on disposal of investment in a subsidiary Losses on impairment of fixed assets Losses on impairment of other assets Losses on diminution in value of inventories Provision for doubtful accounts Depreciation Amortisation of assets under concession contracts Amortisation of deferred concession rights acquisition costs Amortisation of assets transferred from customers Losses on disposal of fixed assets Losses on fixed assets written off Amortisation of goodwill Dividend income Income (loss) from operating activities before changes in operating assets and liabilities (Increase) decrease in operating assets Trade accounts receivable Service income receivable - related party Inventories Input taxes awaiting refund Other current assets Other receivables - related parties Other non-current assets Increase (decrease) in operating liabilities Trade accounts payable Accrued expenses Accrued interest expenses Corporate income tax payable Other current liabilities - related parties Other non-current liabilities Net cash provided by (used in) operating activities (1)
606,430
(34,939)
571,491
173 (3,479) 1,592 20,980 14,277 265,505 24,575
(34,938) 236 27,446 -
(34,765) (3,479) 236 1,592 20,980 14,277 292,951 24,575
14,510 (3,397) 307 11,489 8,349 (40,172)
1,675 -
14,510 (3,397) 1,982 11,489 8,349 (40,172)
921,139
(40,520)
880,619
(1,190) (427) 3,603 1,737 4,103 (11) 732
5,384 (3,000) 1,096 (14,230) 30
4,194 (427) 603 1,737 5,199 (14,241) 762
(24,880) 48,405 (32,969) 22,225 5,115 15,828 963,410
(2,844) (5,103) 22,234 993 (35,960)
(27,724) 43,302 (10,735) 22,225 6,108 15,828 927,450
The amounts shown in the Discontinued operations were presented by the amounts recognised until the date the Company sold its subsidiary (31 March 2008).
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Annual Report 2008 (October - December 2008)
71
(Unit: Thousand Baht) Consolidated financial statements For the year end 30 September 2008 Continuing Discontinued operations operations (1) Total Cash flows from investing activities Securities purchased under resale agreement Increase in current investments Proceeds from long-term loan to an unrelated party Proceeds from disposal of investment in a subsidiary Dividend received from a related party Decrease in advance payment for pipeline installation Capital returned from a joint venture Increase in assets under concession contracts Increase in deferred concession rights acquisition costs Proceeds from disposal of fixed assets Proceeds from sales of property foreclose Acquisition of fixed assets Net cash provided by (used in) investing activities Cash flows from financing activities Increase in bank overdrafts Repayments of short-term loans from financial institutions Cash receipt from short-term loans from financial institutions Repayments made on debentures Cash receipt from long-term loans from financial institutions Repayments of long-term loans from financial institutions Increase in share capital from exercised warrants Dividends paid Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Less: cash and cash equivalents of the disposed subsidiary on the disposal date Cash and cash equivalents at end of the year (1)
72
(85,000) (130,271) 200 12,000 40,172 81 400 (22,477) (155,513) 147 156 (197,090) (537,195)
12,175 (356) 11,819
(85,000) (130,271) 200 12,000 40,172 81 400 (22,477) (155,513) 12,322 156 (197,446) (525,376)
20,010
-
20,010
(2,600,000)
-
(2,600,000)
2,552,000 (2,500,000)
-
2,552,000 (2,500,000)
1,576,700
-
1,576,700
(344,287) 1,155,100 (416,058) (556,535) (130,320) 300,514
(24,141) 36,922
(344,287) 1,155,100 (416,058) (556,535) (154,461) 337,436
(12,781) 157,413
12,781
(12,781) 170,194
The amounts shown in the Discontinued operations were presented by the amounts recognised until the date the Company sold its subsidiary (31 March 2008).
Annual Report 2008 (October - December 2008)
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18.
Other receivable By resolution of the Cabinet-Council on 2 August 2005, it is resolved to approve projects to solve urgently a drought crisis in the eastern area, which include a project to install water distribution pipeline connecting the Pra-Sae reservoir to the Klong Yai reservoir in the Rayong Province ( the pipeline connecting project ), the Company is then assigned to operate for construction of such project in the limit of Baht 1,680 million, separated as below: (a)
A limit of Baht 1,008 million is to be supported by the government and under which the Company is assigned to enter into contracts for pipeline connecting and annexed building construction and contracts to procure and install water pumping machines and electricity system with total contract value of baht 919 million. The Company has entered into such contracts on behalf the government under the resolution as mentioned above.
(b)
For the remaining limit of Baht 672 million, the Company is assigned to make advance payments and the Royal Irrigation Department ( the RID ) will repay to the Company by gradually offsetting the charges on raw water that the company will purchase from the RID each year. Up to 31 December 2008 and 30 September 2008, the Company already made advance payments for a total of approximately Baht 642 million, which is presented in the line item of Other receivable in the non-current assets in the balance sheets.
Presently, the relevant government unit is requesting for the budget but this has yet been allotted from the government for re-imbursement to the Company with respect to the above part (a). Furthermore, the government agency has not yet determined the amount to be withheld from the volumes of raw water purchased every year with respect to the above part (b). However, the Company s management believes that the Company will not incur any loss as a result of entering into this contract and making the advance payments. In addition, the Company s management believes that the project would be beneficial and should the government agency decide not to operate the project itself, the Company would be able to invest in this project by itself, as it would with its other projects, in order to generate benefits. The Company is in the process of negotiating with the relevant agencies and the outcome of such negotiations and other related matters had not yet been finalised on the authorisation date of the financial statements.
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Annual Report 2008 (October - December 2008)
73
19.
Property, plants and equipment (Unit: Baht)
Land
Pumping plants
Buildings
Consolidated financial statements Land, leasehold and Machinery building and Office improvements equipment equipment
Vehicles
Construction in progress
Cost: 30 September 2008 359,566,907 519,601,338 720,688,042 107,961,798 6,046,742,832 334,744,089 8,333,820 19,141,722 Acquisitions 1,585,890 3,416,421 6,165,457 14,115,768 Transfer in/(transfer out) 5,276,751 (5,276,751) Disposal/write off (4,235) Decrease from transferring to unused assets accounts (52,000) (263,151) 31 December 2008 359,566,907 519,601,338 720,688,042 109,495,688 6,055,436,004 340,642,160 8,333,820 27,980,739 Accumulated depreciation: 30 September 2008 96,257,892 62,081,457 36,492,711 978,457,590 180,747,413 2,790,356 Accumulated depreciation on disposed/written-off assets (2,329) Decrease from transferring to unused assets accounts (47,906) (258,655) Depreciation for the year 4,125,608 7,548,012 2,950,423 45,169,086 12,287,917 460,668 31 December 2008 - 100,383,500 69,629,469 39,395,228 1,023,626,676 192,774,346 3,251,024 Net book value: 30 September 2008 359,566,907 423,343,446 658,606,585 71,469,087 5,068,285,242 153,996,676 5,543,464 19,141,722 31 December 2008 359,566,907 419,217,838 651,058,573 70,100,460 5,031,809,328 147,867,814 5,082,796 27,980,739 Depreciation included in consolidated statements of income For the years ended 30 September 2008 (Baht 269 million included in manufacturing cost, and the balance in administrative expenses) For the period as from 1 October 2008 to 31 December 2008 (Baht 63.2 million included in manufacturing cost, and the balance in administrative expenses)
Total 8,116,780,548 25,283,536 (4,235)
(315,151) 8,141,744,698 1,356,827,419
(2,329)
(306,561) 72,541,714 1,429,060,243 6,759,953,129 6,712,684,455 292,951,074 72,541,714 (Unit: Baht)
Land
Pumping plants
Buildings
Separate financial statements Land, leasehold and Machinery building and Office improvements equipment equipment
Vehicles
Cost: 30 September 2008 317,197,440 499,594,743 720,688,043 101,833,778 5,894,835,937 312,588,488 3,882,009 Acquisitions 1,585,890 940,082 5,154,609 Transfer in/(transfer out) 3,276,751 Disposal/write off Decrease from transferring to unused assets accounts (52,000) (263,151) 31 December 2008 317,197,440 499,594,743 720,688,043 103,367,668 5,899,052,770 317,479,946 3,882,009 Accumulated depreciation: 30 September 2008 91,850,940 62,081,456 34,670,056 937,029,436 167,285,425 704,858 Disposal/write off Decrease from transferring to unused assets accounts (47,906) (258,654) Depreciation for the year 3,777,758 7,548,012 2,795,964 41,906,981 11,370,132 195,696 31 December 2008 95,628,698 69,629,468 37,418,114 978,936,417 178,396,903 900,554 Net book value: 30 September 2008 317,197,440 407,743,803 658,606,587 67,163,722 4,957,806,501 145,303,063 3,177,151 31 December 2008 317,197,440 403,966,045 651,058,575 65,949,554 4,920,116,353 139,083,043 2,981,455 Depreciation included in the separate statements of income For the years ended 30 September 2008 (Baht 224 million included in manufacturing cost, and the balance in administrative expenses)
Construction in progress
18,141,724 7,868,762,162 13,115,766 20,796,347 (3,276,751) -
(315,151) 27,980,739 7,889,243,358 - 1,293,622,171 -
(306,560) 67,594,543 - 1,360,910,154 18,141,724 6,575,139,991 27,980,739 6,528,333,204
For the period as from 1 October 2008 to 31 December 2008 (Baht 58.5 million included in manufacturing cost, and the balance in administrative expenses)
74
Annual Report 2008 (October - December 2008)
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Total
246,770,158 67,594,543
As at 30 September 2008, the Company and its subsidiaries transferred certain fixed assets, which are not currently in use and had net book value on the transfer date of approximately Baht 1.4 million, from Property, plant and equipment accounts to Unused assets accounts, which were presented as a part of Other non-current assets in the balance sheets. As at 31 December 2008 and 30 September 2008, the Company and its subsidiaries had certain equipment and fixtures, which were fully depreciated but are still in use. The original costs, before deducting accumulated depreciation, of those assets amounted to approximately Baht 200.8 million and Baht 195.7 million, respectively (The Company only: Baht 184.2 million and Baht 180.3 million respectively). For the years ended 30 September 2008, the Company capitalised borrowing costs amounting to Baht 3.3 million, which were directly attributable to the construction of water distribution pipeline networks and new office buildings, as a part of Construction in progress under the caption Property, plant and equipment . Borrowing costs incurred from the Company s long-term loans from financial institutions and debentures were capitalized at the rate of 4.55 percent per annum, which is determined by dividing interest on long-term loans and debentures, the principal amount of which not exceeding the capital expenditures, by the average capital expenditures. As at 30 December 2008 and 30 September 2008, the Company and it subsidiary had motor vehicles and equipment under finance lease agreements with net book values amounting to Bath 7.1 million and Baht 7.7 million, respectively (the Company only: Baht 5.0 million and Baht 5.4 million, respectively). 20.
Assets under concession contracts (Unit: Baht) Consolidated financial statements Assets under concession Construction contracts in progress Total Cost: 30 September 2008 455,547,790 Purchases 11,961,732 Transfer in (Transfer out) 2,625,000 31 December 2008 470,134,522 Accumulated amortisation: 30 September 2008 81,469,303 Amortisation for the period 6,218,328 31 December 2008 87,687,631 Net book value: 30 September 2008 374,078,487 31 December 2008 382,446,891 Amortisation included in consolidated statements of income: For the years ended 30 September 2008 For the period as from 1 October 2008 to 31 December 2008
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6,927,645 3,632,500 (2,625,000) 7,935,145
462,475,435 15,594,232 478,069,667
-
81,469,303 6,218,328 87,687,631
6,927,645 7,935,145
381,006,132 390,382,036 24,574,830 6,218,328
Annual Report 2008 (October - December 2008)
75
For the period as from 1 October 2008 to 31 December 2008 and for the year 30 September 2008, amortisation of assets under concession contracts amounting to Baht 6.2 million and Baht 24.6 million, respectively, were included in Costs of sales tap water and Costs of services in the statements of income. The subsidiaries have committed to transfer assets under concession contracts to the Provincial Waterworks Authority at the end of concession periods. 21.
Deferred concession rights acquisition costs (Unit: Baht) Consolidated financial statements Deferred concession rights Construction acquisition costs in progress Total Cost: 30 September 2008 234,835,194 Acquisition 31 December 2008 234,835,194 Accumulated amortisation: 30 September 2008 46,405,821 Amortisation for the year 5,078,715 31 December 2008 51,484,536 Net book value: 30 September 2008 188,429,373 31 December 2008 183,350,658 Amortisation included in consolidated statements of income: For the years ended 30 September 2008 For the period as from 1 October 2008 to 31 December 2008
333,085,743 17,810,458 350,896,201
567,920,937 17,810,458 585,731,395
-
46,405,821 5,078,715 51,484,536
333,085,743 350,896,201
521,515,116 534,246,859 14,509,566 5,078,715
There was no borrowing cost capitalised as asset by a subsidiary during the period as from 1 October 2008 to 31 December 2008 (For the year ended 30 September 2008: a subsidiary capitalised borrowing costs amounting to Baht 4.4 million, incurred directly in respect of the concession rights acquisition costs as assets, under the caption of Construction in progress in the Deferred concession rights acquisition costs account). For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008, amortisation of deferred concession rights acquisition costs amounting to Baht 5.1 million and Baht 14.5 million, respectively, were included in Costs of sales tap water and Costs of services in the statements of income.
76
Annual Report 2008 (October - December 2008)
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22.
Intangible asset (Unit: Baht) Consolidated financial statements Right - cost: 30 September 2007 31 December 2008 Accumulated amortisation: 30 September 2007 Amortisation for the period 31 December 2008 Net book value: 30 September 2008 31 December 2008 Amortisation included in statements of income: For the year ended 30 September 2008 For the period as from 1 October 2008 to 31 December 2008 Remaining amortisation periods: 30 September 2008 31 December 2008
201,205,413 201,205,413 38,504,494 2,104,339 40,608,833 162,700,919 160,596,580 8,348,738 2,104,339 19 years 6 months 19 years 3 months
For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008, amortisation of right amounting to Baht 2.1 million and Baht 8.3 million, respectively were included in administrative expenses in the statements of income. 23.
Bank overdraft and short-term loan from financial institutions Consolidated financial statements 31 December 30 September 2008 2008
Bank overdrafts Short-term loans Total
7,500,000 7,500,000
20,009,842 52,000,000 72,009,842
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008
-
20,009,842 20,009,842
As at 31 December 2008 and 30 September 2008, a subsidiary s short-term loan of Baht 7.5 million and Baht 52 million from a financial institution carried interest at the rate of 4.95 and 5 percent per annum, respectively.
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Annual Report 2008 (October - December 2008)
77
24.
Liabilities under finance lease agreements
Liabilities under finance lease agreements Less: Deferred interest expenses Total Less: Portion due within one year Liabilities under finance lease agreements net of current portion
Consolidated financial statements 31 December 30 September 2008 2008 7,531,913 8,406,008 (424,793) (544,178) 7,107,120 7,861,830 (3,559,376) (2,964,012) 3,547,744
4,897,818
(Unit: Baht) Separate financial statements 31 December 30 September 2008 2008 5,415,471 5,981,880 (303,455) (381,445) 5,112,016 5,600,435 (2,039,439) (2,008,452) 3,072,577
3,591,983
The Company and its subsidiary has entered into the finance lease agreements with leasing companies for rental of motor vehicles and equipment for use in their operation, whereby it is committed to pay rental on a monthly basis. The terms of the agreements are generally between 3 and 4 years. Finance lease agreements can not be cancelled. As at 31 December 2008, Future minimum lease payments required under the finance lease agreements were as follows: (Unit: Baht)
Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments
Consolidated financial statements Less than 1 year 1-5 years Over 5 years 3,880,954 3,650,959 (321,578) (103,215) 3,559,376 3,547,744 -
Total 7,531,913 (424,793) 7,107,120 (Unit: Baht)
Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments
78
Annual Report 2008 (October - December 2008)
Less than 1 year 2,265,636 (226,197) 2,039,439
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Separate financial statements 1-5 years Over 5 years 3,149,835 (77,258) 3,072,577 -
Total 5,415,471 (303,455) 5,112,016
25.
Long-term loans from financial institutions
Long-term loans from financial institutions Less: Current portion Long-term loans from financial institutions net of current portion
(Unit: Baht) Consolidated Separate financial financial statements statements 31 December 30 September 31 December 30 September 2008 2008 2008 2008 2,746,784,000 2,855,713,000 2,500,000,000 2,650,000,000 (495,716,000) (420,716,000) (450,000,000) (375,000,000) 2,251,068,000
2,434,997,000
2,050,000,000
2,275,000,000
25.1 Long-term loans of the Company (a) Loans from a financial institution - credit limit of Baht 2,000 million. 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 facility : Baht 2,000 million consisting ofTranche B amounting to Baht 500 million
Tranche A amounting to Baht 1,500 million-
Type of loan Period Interest rate
: Unsecured, with status equivalent to unsecured and unsubordinated debts : 7 years : - Tranche A, interest is payable on a monthly basis at the following ratesYear 1-3 Fixed rate at 6.00 percent per annumYear 4-5 Minimum Loan Rate (MLR) minus 1.50 percent per annum Year 6-7 Minimum Loan Rate (MLR) minus 0.75 percent per annum - Tranche B, interest is payable on a monthly basis at the following ratesYear 1-5 Minimum Loan Rate (MLR) minus 1.50 percent per annumYear 6-7 Minimum Loan Rate (MLR) minus 0.75 percent 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. During 2007, the Company received a letter from a financial institution informing it of an adjustment of the interest rate for Tranche A and Tranche B (only the drawn-down portion) of the loans to be 4.50 percent per annum, effective from July 2007 until the 5th year of the loan agreement (October 2010) whereby the interest rate on the Tranch A and Tranch B (only the drawn-down portion) loans in the 6th-7th years and the Tranche B (not-yet draw down) loans remains unchanged.
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Annual Report 2008 (October - December 2008)
79
Under the loan agreements, the significant conditions that the Company is required to comply with are the maintenance of a net debt to EBITDA ratio of not exceeding 4.5 times and the aggregate amount of defaulted debts not exceeding 5% of shareholders equity as shown in the annual consolidated financial statements, etc. Furthermore, on 13 November 2007, the Company amended the credit facility agreement with the financial institution whereby the financial institution agreed to modify the covenants in the agreement by cancellation the event of default relating to the subsidiary and changed the maintenance of financial ratio from maintaining the net debt to EBITDA ratio of not exceeding 4.5 times, calculated from the consolidated financial statements, to maintaining the debt to equity ratio not exceeding 2 times and not lower than 0 time, and a debt service coverage ratio ( DSCR ) of not lower than 1.10 times, etc., which are to be calculated at the fiscal year-end from the latest audited consolidated financial statements. The Company already drew down a total of Baht 1,775 million loan which comprised Tranche A loan amounting to Baht 1,500 million and Tranche B loan amounting to Baht 275 million and as at 31 December 2008 and 30 September 2008, the Company has outstanding loans from the financial institution according to such agreement amounting to Baht 1,050 million and Baht 1,150 million, respectively. (b) Loans from a financial institution - credit limit of Baht 1,500 million On 6 December 2007, the Company entered into a credit facility agreement with a local financial institution, granting a credit limit of Baht 1,500 million to repay a bridging loan to the same financial institution, as detailed below. Credit facility Type of loan Period Interest rate
: : : :
Baht 1,500 million Unsecured, with status equivalent to unsecured and unsubordinated debts 7 years Interest is payable on a monthly basis and calculated based on the amount of principal drawn down and yet to be repaid from the draw down date to the repayment date, as follow: - The 1st - 36th months Fixed rate at 4.80 percent per annum - The 37th - 60th months Minimum Loan Rate (MLR) minus 1.75 percent per annum - The 61st month onwards Minimum Loan Rate (MLR) minus 1.50 percent per annum Repayment Schedule : Principal is repayable in 12 semi-annual installments, beginning after a grace period of 12 months from the agreement date as scheduled below. - The 1st - 6th installments Baht 50 million each - The 7th - 12th installments Baht 200 million each Under the above loan agreement, the financial institution requires the Company to comply with certain covenants, such as maintaining a debt to equity ratio of not exceeding 2 times and a debt service coverage ratio ( DSCR ) of not lower than 1.1 times, etc., which are to be calculated at the fiscal year-end from the latest audited consolidated financial statements. During 2008, the Company already drew down a full amount under such loan agreement and as at 31 December 2008 and 30 September 2008, the Company had outstanding loans from the financial institution according to such loan agreement amounting to Baht 1,450 million and Baht 1,500 million, respectively.
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(c) Loan from a financial institution - credit limit of Baht 1,000 million On 3 December 2007, the Company entered into a credit facility agreement with a local financial institution, granting a credit limit of Baht 1,000 million to finance the issuance of and underwriting the debentures and the Company s investing activities as detailed below. Credit facility
: Baht 1,000 million, draw down in installments as required.
Type of loan Period Interest rate
: Unsecured, with status equivalent to unsecured and unsubordinated debts : 7 years : Interest is payable on a monthly basis and calculated based on the amount of principal drawn down and yet to be repaid from the draw down date to the repayment date as follows - The 1st - 12th months Minimum Loan Rate (MLR) minus 2.0 percent per annum - The 13th - 48th months Minimum Loan Rate (MLR) minus 1.75 percent per annum - The 49th month onwards Minimum Loan Rate (MLR) minus 1.50 percent per annum Repayment Schedule : Principal is repayable equally in 12 semi-annual installments, beginning after the grace period of 18 months from the first draw down date and to be completed within 84 months from the first draw down date. Under the above loan agreement, the financial institution required the Company to comply with certain covenants, such as maintaining a debt to equity ratio of not exceeding 2 times and not lower than 0 time, and a debt service coverage ratio ( DSCR ) of not lower than 1.1 times, etc., which are to be calculated at the fiscal year-end from the latest audited consolidated financial statements. As at 31 December 2008 and 30 September 2008, the Company has not drawn down under this loan facility. 25.2 Long-term loans of subsidiary - Universal Utilities Company Limited (a) 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 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. Subsequently on 9 May 2007, the subsidiary amended the credit facility agreement with the financial institution that principal repayments are rescheduled to be made in 21 quarterly installments of Baht 11.4 million each. As at 31 December 2008 and 30 September 2008, the subsidiary had outstanding loans according to such agreements totalling approximately Baht 194.3 million and Baht 205.7 million, respectively. (b) On 15 December 2008, the subsidiary entered into a credit facility agreement with a local financial institution for a credit limit of Baht 200 million. Up to 31 December 2008, the subsidiary had already drawn down of Baht 52.5 million under such loan agreement. The loan carries interest at the Minimum Loan Rate (MLR) minus 1.75% per annum for the first fourth year, and thereafter at MLR minus 1.5% per annum until maturity. Interest is payable on a monthly basis. The principal is to be repaid in 23 quarterly installments of Baht
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8.75 million each, except for the twenty third installment of Baht 7.5 million commencing the eighteenth month after the agreement date. As at 31 December 2008, the subsidiary had outstanding loans according to such agreements totalling approximately Baht 52.5 million. 26.
Share capital On 24 January 2008, the Annual General Meeting of the shareholders of the Company approved the reduction of the Company s registered share capital from 1,665,000,000 ordinary shares at a par value of Baht 1 each to be 1,663,725,149 ordinary shares at a par value of Baht 1 each through the cancellation of 1,274,851 unissued ordinary shares with a par value of Baht 1 each, previously reserved to accomodate the exercise of warrants, which expired. During the year ended 30 September 2008, the Company registered the increases in its issued and paid-up share capital totaling Baht 317.3 million as a result of the shares offered and the rights exercised by warrant holders. This resulted in an increase of Baht 951.2 million in share premium. As at 30 September 2008, the Company s issued and paid-up share capital is therefore Baht 1,663.7 million. Reconciliation of ordinary share capital and share premium
Balance as at 30 September 2007 Increased share capital during the year Balance as at 30 September 2008 Increased share capital during the period Balance as at 31 December 2008
27.
Ordinary share capital Number of shares Amount Baht Baht 1,346,394,130 1,346,394,130 317,331,019 317,331,019 1,663,725,149 1,663,725,149 1,663,725,149 1,663,725,149
Share premium 1,187,358,422 951,163,857 2,138,522,279 2,138,522,279
Warrants The warrants issued to the Company s employees, directors and advisors to the Company s Board of Director (EASTW-WA) and the warrants issued to the Company s existing shareholders and general public (EASTWW1) were expired in December 2007. Movements in the number of warrants during the year ended 30 September 2008 were as follows: (Unit: Units)
Number of warrants as at 30 September 2007 Less: Exercised during the year Expired during the year Number of warrants as at 30 September 2008
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Annual Report 2008 (October - December 2008)
Warrant issued to the Company s employees, directors and advisors 251,400 (251,400) -
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Warrant issued to the Company s existing shareholder and general public 289,986,940 (288,712,089) (1,274,851) -
Total 290,238,340 (288,963,489) (1,274,851) -
28.
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.
29.
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 income 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.
30.
Dividends The Company On 24 January 2008, the Annual General Meeting of the Company s shareholders approved a dividend payment of Baht 0.25 per share for 2007 fiscal year, totalling Baht 416 million, to the Company s shareholders. The Company paid such dividend on 20 February 2008. Subsidiary On 30 September 2008, the Extraordinary General Meeting of the Shareholders No. 4/2551 of Universal Utilities Company Limited, a subsidiary, approved the payment of a dividend of Baht 0.55 per share to its shareholders, or a total of Baht 28 million. The dividend is to be paid in a monthly basis of Baht 4.675 million each from October 2008 to March 2009. On 2 August 2007, the Extraordinary General Meeting of the Shareholder No. 5/2550 of Universal Utilities Company Limited, a subsidiary, approved the payment of a dividend of Baht 1.373 per share to its shareholders, or a total of Baht 70 million. The dividend payments were made in two quarters, on 31 October 2007 and 31 January 2008.
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31.
Expenses by nature Significant expenses by nature are as follow:
Electricity expenses Depreciation and amortisation expenses Hiring and service expenses Salary and wages and other employee benefits Purchases of raw water Repair and maintenance expenses Rental expenses Raw materials and consumables used Losses on impairment and diminution in value of assets and provision for doubtful accounts Waterworks management expense
32.
Consolidated financial statements For the period as from 1 October For the year 2008 to 31 ended 30 December 2008 September 2008 91,743,210 343,368,633 85,943,096 340,384,207 73,120,541 168,554,022 38,101,084 159,689,292 28,621,451 120,382,928 11,988,366 50,531,074 11,571,584 43,983,115 8,232,701 23,557,374 17,167,141 -
35,770,685 -
(Unit: Baht) Separate financial statements For the period as from 1 October For the year 2008 to 31 ended 30 December 2008 September 2008 68,919,619 264,137,419 67,594,543 246,770,158 6,954,026 28,451,485 26,878,118 100,711,348 26,321,767 113,375,270 6,651,092 35,481,712 9,378,413 36,768,458 16,894,136 39,379,797
34,344,932 141,890,882
Directors remuneration Directors remuneration represents the benefits paid to the Company s directors in accordance with Section 90 of the Public Limited Companies Act, exclusive of salaries, bonus and related benefits payable to management.
33.
Provident fund The Company and its subsidiary, which is Universal Utilities Company Limited, and employees have established a provident fund in accordance with the Provident Fund Act B.E. 2530. 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 are required to contribute at the rates of 5% to 10% of the employees basic salaries. This provident fund, which is managed by Kasikorn Asset Management Company Limited, will be paid to employees upon termination in accordance with the fund rules. For the period as from 1 October 2008 to 31 December 2008 and for the year ended 30 September 2008, approximately Baht 1.9 million and Baht 7.2 million, respectively, were contributed to the fund by the Company and its subsidiaries (The Company only: Baht 1.2 million and Baht 4.3 million, respectively).
34.
Income tax Corporate income tax was calculated on net income before income tax after adding back non-tax deductible expenses and deducting tax-exempted income.
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35.
Earnings per share Basic earnings per share is calculated by dividing net income by the weighted average number of ordinary shares in issue during the period.
36.
Commitments and contingent liabilities The Company and its subsidiaries had the following commitments and contingent liabilities.
36.1 Capital commitments As at 31 December 2008 and 30 September 2008, the Company and its subsidiaries had commitments in respect of in-progress construction of Baht 323.5 million and Baht 331.6 million, respectively (The Company only: Baht 265.2 million and Baht 252.2 million, respectively). 36.2 Operating lease commitments The Company and its subsidiaries have entered into several lease agreements in respect of the lease of motor vehicles and equipment. The terms of the agreements are generally between 1 and 3 years. Operating lease agreements are non-cancelable. As at 31 December 2008 and 30 September 2008, future minimum lease payments required under these noncancellable operating leases contracts were as follows. Consolidated financial statements 31 December 30 September 2008 2008 Payable within: Less than 1 year 1 to 5 years
6.3 2.9
13.0 2.1
(Unit: Million Baht) Separate financial statements 31 December 30 September 2008 2008 5.2 2.4
12.1 1.7
36.3 Raw materials purchase agreement and long-term service commitments 36.3.1 As at 31 December 2008 and 30 September 2008, the Company had a raw water purchase agreement with the Royal Irrigation Department whereby it is to purchase raw water at the price specified in a Ministerial Regulation. 36.3.2 As at 31 December 2008 and 30 and 30 September 2008, the Company had a raw water purchase agreement with Siam Water Resource Company Limited as described in Notes 37.6 to the financial statements. 36.3.3 As at 31 December 2008 and 30 September 2008, the Company and its subsidiaries had commitments in respect of service agreements payable in the future of approximately Baht 355.5 million and Baht 114.8 million, respectively (The Company only: Baht 53.8 million and Baht 28.0 million, respectively).
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36.4 Guarantees 36.4.1 As at 31 December 2008 and 30 September 2008, the Company and its subsidiaries had letters of guarantee totaling Baht 260.9 million and Baht 268.2 million, respectively (The Company only: Baht 55.9 million and Baht 59.0 million, respectively) 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 systems in the Eastern Seaboard area, and to counterparties for bid bonds and performance bonds. 36.4.2 As at 31 December 2008 and 30 September 2008, a subsidiary had contingent liabilities in respect of being a guarantor to its three subsidiaries in a credit limit of Baht 200 million for letters of guarantee issued by local commercial banks to those subsidiaries for compliance to agreements with respect to their electricity consumption guarantee, tap water production and distribution and water consumers information records. 36.5 Litigation As at 31 December 2008 and 30 September 2008, the Company and its subsidiary were sued as defendants in litigation cases with significant claim as follow. 36.5.1 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. However, on 26 January 2006, the Court of First Instance issued an order dismissing the lawsuit and later the plaintiff lodged an appeal with the Court of Appeal on 22 March 2006. The Company has already made its plea contesting the plaintiff s appeal and as at 31 December 2008 and 30 September 2008, the case is currently being heard by the Appeal Court. The Company s 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. 36.5.2 Universal Utilities Company Limited, a subsidiary was sued as a co-defendant together with the Provincial Waterworks Authority ( PWA ) in a case brought in connection with illegal acts performed by administrative agencies or state officials. The plaintiff petitioned the administrative court to void the selection process by which a private operator was selected to produce tap water for distribution to the PWA in the area belonging to the Rayong Waterworks. On 16 March 2007, the Rayong Administrative Court ordered the selection process voided in accordance with the plaintiff s petition, and also declared void the agreement appointing a private firm to produce water for sale to the Rayong Waterworks, which had resulted from an illegal selection process. However, the PWA and the subsidiary lodged appeals with the Rayong Administrative Court on 12 April 2007 and the Rayong Administrative Court has issued a court receipt for such appeal and then passed it to the Supreme Court. The case is currently being heard by the Supreme Court under the court receipt No. Aor. 278/50. Since PWA and the subsidiary have to comply with conditions in the agreement and are further obliged to each other as stipulated in the agreement until the case is finalised, in accordance with Section 70 of the Royal
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Decree on Establishment of and Procedures for Administrative Court Act B.E. 2542, the Company s management therefore believes that the subsidiary will incur no losses as a result of the termination of the agreement because, if such a termination occurs the PWA will have to compensate the subsidiary for costs of construction and improvements made to the waterworks, and for other expenses incurred by the subsidiary. Therefore, no provision has yet been made in the accounts. 36.5.3 On 20 October 2008, the Company was sued by a company in a lawsuit with a black case number 5930/2551 regarding a breach of a construction agreement. The litigation filed with the Civil Court by the plaintiff requested that the Company pay damages totaling Baht 40.2 million. On 29 December 2008, the Company filed a lawsuit with a black case number 6848/2551 regarding a breach of a construction contract, suing the aforementioned company and a local commercial bank as the work guarantor of that company. The litigation filed with the Civil Court by the Company requested that the defendants pay damages totaling Baht 37.4 million. On 26 January 2009, the Civil Court set a date for the settlement of issues under the lawsuit with the black case number 5930/2551. However, the attorney of the Company has petitioned the Court to merge the settlement of issues of the lawsuit with the black case number 6848/2551 to be in one case since both cases are based on the same factual information. The Court has considered the request and has set a date for the settlement of issues of these two lawsuits on 23 March 2009. 37.
Significant agreements Beside the lending and borrowing agreements as discussed in relevant notes to financial statements, the Company and its subsidiaries have the following significant agreements. The Company
37.1 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 Company s 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 Company s 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 paid 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. 37.2 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 revenue 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
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installation of centralised 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 to the Pattaya Waterworks. Consequently, 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. 37.3 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. 37.4 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 ( SAO ), it therefore revised the 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. 37.5 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 be adjusted annually. 37.6 On 13 December 2007, the Company has entered into the raw water procurement agreements with Siam Water Resource Company Limited whereby the Company is required to purchase a minimum of 10 million cubic meters per annum for a price of 6 Baht per cubic meter over a 10-year period. The price shall be adjusted based on the change of electricity price in accordance with the fuel adjustment charge (Ft) rate, announced by Provincial Electricity Authority.
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The Subsidiaries 37.7 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). 37.8 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). 37.9 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). 37.10Chachoengsao 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 knowhow 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. 37.11 On 27 September 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 subsidiary s 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. However, the Company disposed investment in such company on 31 March 2008 as described in Notes 17 to the financial statements. 37.12 On 24 March 2004, Universal Utilities Company Limited entered into an agreement with Egcom Tara 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.
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37.13 On 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 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. 38.
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 managements 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 31 December 2008 and 30 September 2008 is summarised as follows:
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38.1 Operating results by business segment (Unit: Thousand Baht) Consolidated financial statements For the period as from 1 October 2008 to 31 December 2008 Sales - other Service income Raw water Tap water Waterworks Water loss distribution distribution management reduction business business Others business project Others Elimination Revenue Revenue from external customers Inter-segment revenue Total revenue Cost of sales/services Operating profit Segment operating profit (loss) Unallocated revenue/expenses Interest income and dividend income Other income Selling and servicing expenses Administrative expenses Finance cost Income tax Net income
Total
393,114 25,810 418,924 (177,625)
144,744 144,744 (99,992)
195 27 222 (379)
10,725 50,955 61,680 (56,025)
47,995 47,995 (48,599)
14,723 1,245 15,968 (10,952)
(78,037) (78,037) 77,277
611,496 611,496 (316,295)
241,299
44,752
(157)
5,655
(604)
5,016
(760)
295,201 19,755 3,058 (6,953) (76,877) (34,459) (53,535) 146,190
(Unit: Thousand Baht) Consolidated financial statements For the year ended 30 September 2008 Sales - other Service income Raw water Tap water Water pipeline Waterworks Water loss distribution distribution distribution management reduction business business business(1) Others business project Others Revenue Revenue from external customers 1,672,600 Inter-segment revenue 80,120 Total revenue 1,752,720 Cost of sales/services (714,482) Operating profit Segment operating profit (loss) 1,038,238 Unallocated revenue/expenses Interest income and dividend income Other income Selling and servicing expenses Administrative expenses Finance cost Income tax Net income (1)
Elimination
Total
541,146 541,146 (367,883)
18,886 18,886 (16,980)
3,079 1,376 4,455 (4,299)
28,708 197,307 226,015 (184,937)
73,609 73,609 (72,028)
40,898 7,663 48,561 (49,513)
- 2,378,926 (286,466) (286,466) 2,378,926 280,679 (1,129,443)
173,263
1,906
156
41,078
1,581
(952)
(5,787) 1,249,483 44,789 13,538 (44,563) (379,773) (165,936) (180,812) 536,726
This business segment is operated by Eastern Hobas Pipes Company Limited, in which the Company disposed its investment to an unrelated company on 31 March 2008.
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(Unit: Thousand Baht) Separate financial statements For the period as from 1 October 2008 to 31 December 2008 Sales Raw water water Tap distribution distribution Service business business Others income Revenue Revenue from external customers Inter-segment revenue Total revenue Cost of sales/services Operating profit Segment operating profit (loss) Unallocated revenue/expenses Interest income and dividend income Other income Selling and servicing expenses Administrative expenses Finance cost Income tax Net income
Total
393,113 25,811 418,924 (177,625)
50,770 50,770 (50,513)
181 27 208 (375)
7,740 761 8,501 (5,999)
451,804 26,599 478,403 (234,512)
241,299
257
(167)
2,502
243,891 23,619 2,296 (6,457) (62,846) (30,880) (43,056) 126,567 (Unit: Thousand Baht)
Revenue Revenue from external customers Inter-segment revenue Total revenue Cost of sales/services Operating profit Segment operating profit (loss) Unallocated revenue/expenses Interest income and dividend income Other income Selling and servicing expenses Administrative expenses Finance cost Income tax Net income
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Annual Report 2008 (October - December 2008)
Raw water distribution business
Separate financial statements For the year ended 30 September 2008 Sales water Tap distribution Service business Others income
1,672,600 80,120 1,752,720 (714,482)
185,922 185,922 (183,946)
716 1,376 2,092 (2,322)
14,325 2,796 17,121 (18,036)
1,873,563 84,292 1,957,855 (918,786)
1,038,238
1,976
(230)
(915)
1,039,069
Total
88,770 3,847 (42,105) (299,834) (135,437) (135,632) 518,678
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38.2 Asset information by business segment
Property, plant and equipment - net Assets under concession contracts - net Deferred concession rights acquisition costs - net Inventories - net Trade accounts receivable - net Unbilled receivable Service income receivable Unallocated assets (1) Total assets
(Unit: Thousand Baht) Consolidated financial statements As at 31 December 2008 Waterworks management Unallocated business assets(1) Elimination Total 171,455 698,809 6,712,684
Raw water distribution business 5,831,897
Tap water distribution business 10,523
-
266,600
123,782
-
-
390,382
150,436 5,892,333
410,109 9,516 33,259 65,972 795,979
124,138 38,904 50,182 508,461
953 11 2,462,915 3,162,688
(48,527) (1,058,791) (1,107,318)
534,247 10,469 174,083 65,972 50,182 1,404,124 9,342,143
(1)
Such assets are current assets and/or assets, which have been commonly used in every business segments, and thus the Company and its subsidiaries cannot allocate them to each business segment.
(Unit: Thousand Baht) Consolidated financial statements As at 30 September 2008
Property, plant and equipment - net Assets under concession contracts - net Deferred concession rights acquisition costs - net Inventories - net Trade accounts receivable - net Unbilled receivable Service income receivable Unallocated assets (1) Total assets (1)
Raw water distribution business 5,870,376
Tap water distribution business 12,304
Waterworks management business 170,145
-
264,900
116,106
155,834 6,026,210
392,945 9,140 49,442 60,147 788,878
128,570 45,175 27,224 487,220
Unallocated assets(1) 707,128
Elimination -
Total 6,759,953
-
-
381,006
9,060 2,217,310 2,933,498
(54,248) (851,012) (905,260)
521,515 18,200 196,203 60,147 27,224 1,366,298 9,330,546
Such assets are current assets and/or assets, which have been commonly used in every business segments, and thus the Company and its subsidiaries cannot allocate them to each business segment.
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Annual Report 2008 (October - December 2008)
93
(Unit: Thousand Baht)
Property, plant and equipment - net Inventories - net Trade accounts receivable - net Unallocated assets (1) Total assets
Raw water distribution business 5,831,897 150,436 5,982,333
Separate financial statements As at 31 December 2008 Tap water distribution Unallocated business assets (1) 1,656 694,780 167 25,157 2,014,760 26,813 2,709,707
Total 6,528,333 167 175,593 2,014,760 8,718,853
(1)
Such assets are current assets and/or assets, which have been commonly used in every business segments, and thus the Company cannot allocate them to each business segment.
Property, plant and equipment - net Inventories - net Trade accounts receivable - net Unallocated assets (1) Total assets (1)
39.
Raw water distribution business 5,870,376 155,834 6,026,210
(Unit: Thousand Baht) Separate financial statements As at 30 September 2008 Tap water distribution Unallocated business assets (1) Total 1,792 702,972 6,575,140 8,228 8,228 21,777 177,611 1,994,788 1,994,788 23,569 2,705,988 8,755,767
Such assets are current assets and/or assets, which have been commonly used in every business segments, and thus the Company cannot allocate them to each business segment.
Sale of raw water and tap water by distribution networks/areas 39.1 Sales of raw water (a) Sales volume of raw water classified by water distribution networks
Nong Pla Lai - Map Ta Pud Network Dok Krai - Map Ta Pud Network Chachoengsao - Chonburi Network Nong Pla Lai - Nong Khor Network Total
94
Annual Report 2008 (October - December 2008)
(Unit: Million Litres) Separate financial statements For the period as from 1 October 2008 to For the year ended 31 December 2008 30 September 2008 15,659 70,000 13,592 58,869 18,454 80,605 4,155 18,211 51,860 227,685
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(b)
Sales, costs of sales and gross profit of raw water
Nong Pla Lai - Map Ta Pud Network Dok Krai - Map Ta Pud Network Chachoengsao - Chonburi Network Nong Pla Lai - Nong Khor Network Total
(Unit: Thousand Baht) Separate financial statements For the period as from 1 October 2008 For the year ended to 31 December 2008 30 September 2008 Costs of Gross Costs Gross Sales sales profit Sales of sales profit 127,132 (31,079) 96,053 595,001 (148,724) 446,277 119,587 (30,279) 89,308 469,142 (129,551) 339,591 139,296 (100,677) 38,619 545,429 (374,847) 170,582 32,909 (15,589) 17,320 143,148 (61,360) 81,788 418,924 (177,624) 241,300 1,752,720 (714,482) 1,038,238
Sales of raw water from Chachoengsao - Chonburi Network consisted of:
Nong Khor - Laem Chabang Network 1 Nong Khor - Laem Chabang Network 2 Chachoengsao Network Total (c)
(Unit: Thousand Baht) Separate financial statements For the period as from 1 October 2008 to For the year ended 31 December 2008 30 September 2008 88,148 371,909 30,313 95,474 20,835 78,046 139,296 545,429
Property, plant and equipment, classified by raw water distribution network
Net book value Nong Pla Lai - Map Ta Pud Network Dok Krai - Map Ta Pud Network Chachoengsao -Cholburi Network Nong Pla Lai - Nong Khor Network Total
(Unit: Thousand Baht) Separate financial statements 31 December 2008 30 September 2008 883,367 873,554 91,464 93,901 4,729,594 4,753,666 127,472 129,255 5,831,897 5,850,376
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Annual Report 2008 (October - December 2008)
95
(d)
Proportion of raw water sold to end users
Industrial Estate Waterworks Authority Factories Total
(Unit: Percentage) Separate financial statements For the period as from 1 October 2008 to For the year ended 31 December 2008 30 September 2008 47 52 38 31 15 17 100 100
39.2 Sales of tap water (a)
Sales volume of tap water by area (Unit: Million Litres)
Chachoengsao waterwork Bangpakong waterwork Nakornsawan waterwork Sattahip waterwork Koh Samui waterwork Koh Sichang waterwork Borwin waterwork Koh Lan waterwork Rayong waterwork Total
96
Annual Report 2008 (October - December 2008)
Consolidated financial Separate financial statements statements For the period For the period as from For the year as from For the year 1 October 2008 ended 1 October 2008 ended to 31 December 30 September to 31 December 30 September 2008 2008 2008 2008 2,649 9,723 2,985 10,410 620 2,403 2,593 9,657 2,593 9,657 232 875 232 875 6 36 6 36 215 798 215 798 13 60 13 60 3,497 13,571 12,810 47,533 3,059 11,426
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(b)
Sales, costs of sales and gross profit of tap water (Unit: Thousand Baht)
Chachoengsao waterwork Bangpakong waterwork Nakornsawan waterwork Sattahip waterwork Koh Samui waterwork Koh Sichang waterwork Borwin waterwork Koh Lan waterwork Rayong waterwork Eliminated Total
Consolidated financial statements For the period as from 1 October For the year ended 2008 to 31 December 2008 30 September 2008 Costs o Gross Costs of Gross Sales f sales profit Sales sales profit 26,780 (11,752) 15,028 99,940 (45,457) 54,483 26,325 (11,528) 14,797 100,011 (41,232) 58,779 7,023 (3,963) 3,060 27,164 (15,781) 11,383 35,041 (34,811) 230 124,234 (122,849) 1,385 11,692 (11,575) 117 2,634 (2,656) (22) 421 (421) 44,209 (43,768) 441 2,852 (2,950) (98) 11,265 (11,106) 159 763 (755) 8 3,580 (3,567) 13 33,847 (22,255) 11,592 128,109 (81,467) 46,642 25,855 25,855 123,963 123,963 144,744 (74,155) 70,589 541,146 (243,920) 297,226 (Unit: Thousand Baht)
Chachoengsao waterwork Bangpakong waterwork Nakornsawan waterwork Sattahip waterwork Koh Samui waterwork Koh Sichang waterwork Borwin waterwork Koh Lan waterwork Rayong waterwork Total
Separate financial statements For the period as from 1 October For the year ended 2008 to 31 December 2008 30 September 2008 Costs o Gross Costs of Sales f sales profit Sales sales 35,041 (34,811) 230 124,234 (122,849) 11,692 (11,575) 117 44,209 (43,768) 421 (421) 2,634 (2,656) 2,852 (2,950) (98) 11,265 (11,106) 763 (755) 8 3,580 (3,567) 50,769 (50,512) 257 185,922 (183,946)
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Gross profit 1,385 441 (22) 159 13 1,976
Annual Report 2008 (October - December 2008)
97
(c)
Property, plant and equipment, assets under concession contracts and deferred concession rights acquisition costs classified by tap water area
Net book value Chachoengsao waterwork Bangpakong waterwork Nakornsawan waterwork Sattahip waterwork Koh Samui waterwork Koh Sichang waterwork Borwin waterwork Koh Lan waterwork Rayong waterwork Total
40.
Consolidated financial statements 31 December 30 September 2008 2008 129,849 130,520 137,252 135,001 66,455 68,751 156,733 161,242 164,496 162,316 25,949 26,713 37,353 29,198 35,345 35,099 353,175 336,130 1,106,607 1,084,970
(Unit: Thounsand Baht) Separate financial statements 31 December 30 September 2008 2008 1,656 1,792 1,656 1,792
Financial instruments Financial risk management The Company s and its subsidiaries s financial instruments, as defined under Thai Accounting Standard No. 48 Financial Instruments: Disclosure and Presentations , principally comprise cash and cash equivalents, securities purchased under resale agreement, trade accounts receivable, short-term and long-term lendings, investments, bank overdrafts, short-term and long-term loans, retentions payable, liabilities under finance lease agreements. The financial risks associated with these financial instruments and how they are managed is discussed below.
40.1 Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to securities purchased under resale agreement, trade accounts receivable, short-term and long-term lendings, and other receivable. The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. Although the Company and its subsidiaries may expose to concentration risk due to their having a few large customers, those customers are in government sector. The management believes that such risk is therefore low. The maximum exposure to credit risk is limited to the carrying amounts of securities purchased under resale agreement, trade accounts receivables, short-term and long-term loans and other receivable as stated in the balance sheets. 40.2 Interest rate risk The Company s and its subsidiaries s exposure to interest rate risk relate primarily to their deposits with financial institutions, securities purchased under resale agreement, short-term and long-term lendings, investments, short-term and long-term borrowings and liabilities under finance lease agreements. Although most of the 98
Annual Report 2008 (October - December 2008)
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Company s and its subsidiaries s financial assets bear fixed interest rates, they have repricing periods of less than 1 year. Their liabilities are also charged with fixed rates of interest but those rates are lower than current market rate. Hence, the interest rate risk is expected to be minimal. As at 31 December 2008 and 30 September 2008, financial assets and liabilities, classified by interest rate types, are as follows: (Unit: Thousand Baht) Consolidated financial statements Outstanding balances of financial instruments as at 31 December 2008 Floating Fixed Non-interest interest rates interest rates bearing Total Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Service income receivable from related party - billed Dividend receivable from a related party Other receivables - related parties Restricted bank deposits Other receivable Financial liabilities Bank overdraft and short-term loan from financial institutions Trade accounts payable Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable
101,339 -
261,010 83,584 -
726 174,083
102,065 261,010 83,584 174,083
101,339
9,076 353,670
27,478 8,088 6 642,199 852,580
27,478 8,088 6 9,076 642,199 1,307,589
246,784 246,784
7,500 7,107 2,500,000 2,514,607
67,523 37,401 104,924
7,500 67,523 7,107 2,746,784 37,401 2,866,315
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Annual Report 2008 (October - December 2008)
99
(Unit: Thousand Baht) Consolidated financial statements Outstanding balances of financial instruments as at 31 December 2008 Floating Fixed Non-interest interest rates interest rates bearing Total Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Service income receivable from related party - billed Short-term loan to an unrelated party - net Other receivables - related parties Restricted bank deposits Other receivable Financial liabilities Bank overdraft and short-term loan from financial institutions Trade accounts payable Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable
79,431 -
90,000 85,000 143,522 -
763 196,203
170,194 85,000 143,522 196,203
79,431
8,800 9,076 336,398
16,961 11 642,199 856,137
16,961 8,800 11 9,076 642,199 1,271,966
20,010 205,713 225,723
52,000 7,862 2,650,000 2,709,862
73,087 37,991 111,078
72,010 73,087 7,862 2,855,713 37,991 3,046,663 (Unit: Thousand Baht)
Separate financial statements Outstanding balances of financial instruments as at 31 December 2008 Floating Fixed Non-interest interest rates interest rates bearing Total Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Dividend receivable from related parties Other receivables - related parties Restricted bank deposits Investments in subsidiaries - net Long-term investments Long-term loan to a related party Other receivable
100
Annual Report 2008 (October - December 2008)
54,918 54,918
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261,010 83,584 9,076 300,000 653,670
200 175,593 22,113 4,769 515,000 85,388 642,199 1,445,262
55,118 261,010 83,584 175,593 22,113 4,769 9,076 515,000 85,388 300,000 642,199 2,153,850
(Unit: Thousand Baht) Separate financial statements Outstanding balances of financial instruments as at 31 December 2008 Floating Fixed Non-interest interest rates interest rates bearing Total Financial liabilities Trade accounts payable Payable for purchase of fixed assets Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable Rental guarantees received from related parties
Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Short-term loan to an unrelated party Dividend receivable from a related party Other receivables - related parties Restricted bank deposits Investments in subsidiaries - net Long-term investments Long-term loan to a related party Other receivable Financial liabilities Bank overdrafts and short-term loan from financial institutions Trade accounts payable Payable for purchase of fixed assets Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable Rental guarantees received from related parties
-
5,112 2,500,000 2,505,112
14,787 7,666 25,600 761 48,814
14,787 7,666 5,112 2,500,000 25,600 761 2,553,926
38,221 38,221
90,000 85,000 143,522 8,800 9,076 300,000 636,398
328 177,611 28,050 6,867 515,000 85,388 642,199 1,455,443
128,549 85,000 143,522 177,611 8,800 28,050 6,867 9,076 515,000 85,388 300,000 642,199 2,130,062
20,010 20,010
5,600 2,650,000 2,655,600
14,697 10,039 24,496 761 49,993
20,010 14,697 10,039 5,600 2,650,000 24,496 761 2,725,603
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Annual Report 2008 (October - December 2008)
101
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: (Unit: Thousand Baht) Consolidated financial statements As at 31 December 2008 Remaining periods to repricing dates or maturity dates Less than 1 5 Over No At call 1 year years 5 years maturity Financial assets Securities purchased under resale agreement Current investments Restricted bank deposits Financial liabilities Bank overdrafts and short-term loans from financial institutions Liabilities under finance lease agreements Long-term loans from financial institutions
Total
Interest rate % p.a.
-
261,010 83,584 9,076 353,670
-
-
-
261,010 2.60 83,584 1.50 - 4.00 9,076 2.053 - 2.75 353,670
-
7,500 3,559 450,000 461,059
3,548 2,050,000 2,053,548
-
-
7,500 4.95 7,107 2.17 - 16.19 2,500,000 4.50 - 4.80 2,514,607 (Unit: Thousand Baht)
Consolidated financial statements As at 30 September 2008 Remaining periods to repricing dates or maturity dates Less than 1 5 Over No At call 1 year years 5 years maturity Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Short-term loan to an unrelated party - net Restricted bank deposits Financial liabilities Bank overdrafts and short-term loans from financial institutions Liabilities under finance lease agreements Long-term loans from financial institutions (1)
102
Interest rate % p.a.
90,000
3.71
-
90,000
-
-
-
-
85,000 143,522 8,800 9,076 336,398
-
-
-
85,000 3.70 143,522 2.38 - 4.25 8,800 - (1) 9,076 2.38 - 2.75 336,398
52,000 52,000
2,964 375,000 377,964
4,898 2,275,000 2,279,898
-
-
52,000 5.00 7,862 2.17 - 16.19 2,650,000 4.50 - 4.80 2,709,862
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Annual Report 2008 (October - December 2008)
Total
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(Unit: Thousand Baht) Separate financial statements As at 31 December 2008 Remaining periods to repricing dates or maturity dates Less than 1 5 Over No At call 1 year years 5 years maturity Financial assets Securities purchased under resale agreement Current investments Restricted bank deposits Long-term loan to a related parties Financial liabilities Liabilities under finance lease agreements Long-term loans from financial institutions
Total
Interest rate % p.a.
-
261,010 83,584 9,076 353,670
300,000 300,000
-
-
261,010 2.60 83,584 1.50 - 4.00 9,076 2.053 - 2.75 300,000 5.25 653,670
-
2,039
3,073
-
-
5,112 2.17 - 16.19
-
450,000 452,039
2,050,000 2,053,073
-
-
2,500,000 4.50 - 4.80 2,505,112 (Unit: Thousand Baht)
Separate financial statements As at 30 September 2008 Remaining periods to repricing dates or maturity dates Less than 1 5 Over No At call 1 year years 5 years maturity Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Short-term loan to an unrelated party - net Restricted bank deposits Long-term loans to a related party Financial liabilities Liabilities under finance lease agreements Long-term loans from financial institutions (1)
Total
Interest rate % p.a.
90,000
3.71
-
90,000
-
-
-
-
85,000 143,522 8,800 9,076 336,398
300,000 300,000
-
-
85,000 3.70 143,522 2.38 - 4.25 8,800 - (1) 9,076 2.375 - 2.75 300,000 5.25 636,398
-
2,008 375,000 377,008
3,592 2,275,000 2,278,592
-
-
5,600 2.17 - 16.19 2,650,000 4.50 - 4.80 2,655,600
Default
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Annual Report 2008 (October - December 2008)
103
40.3 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 31 December 2008 and 30 September 2008, counting from the balance sheet dates, are as follows: (Unit: Thousand Baht)
At call Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Service income receivable - related party Dividend receivable from a related party Other receivables - related parties Restricted bank deposits Other receivable Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable
104
Annual Report 2008 (October - December 2008)
Consolidated financial statements As at 31 December 2008 1-5 Over No years 5 years maturity
Within 1 year
Total
102,065
-
-
-
-
102,065
10,753 112,818
261,010 83,584 163,330 27,478 8,088 6 543,496
5,000 5,000
642,199 642,199
4,076 4,076
261,010 83,584 174,083 27,478 8,088 6 9,076 642,199 1,307,589
7,500 7,500
67,523 3,559 495,716 566,798
3,548 2,051,068 37,401 2,092,017
200,000 200,000
-
7,500 67,523 7,107 2,746,784 37,401 2,866,315
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(Unit: Thousand Baht)
Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Service income receivable - related party Short-term loan to an unrelated party - net Other receivables - related parties Restricted bank deposits Other receivable Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable (1)
Consolidated financial statements As at 30 September 2008 1-5 Over No years 5 years maturity
At call
Within 1 year
80,194
90,000
-
-
-
170,194
3,584 83,778
85,000 143,522 192,619 16,961 8,800 (1) 11 536,913
5,000 5,000
642,199 642,199
4,076 4,076
85,000 143,522 196,203 16,961 8,800 11 9,076 642,199 1,271,966
72,010 72,010
73,087 2,964 420,716 496,767
4,898 2,034,997 37,991 2,077,886
400,000 400,000
-
72,010 73,087 7,862 2,855,713 37,991 3,046,663
Total
Default
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Annual Report 2008 (October - December 2008)
105
(Unit: Thousand Baht)
Within 1 year
At call Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Dividend receivable from related party Other receivables - related parties Restricted bank deposits Investment in subsidiaries Long-term investments Long-term loan to related party Other receivable Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Payable for purchase of fixed assets Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable Rental guarantees received from related parties
106
Annual Report 2008 (October - December 2008)
Separate financial statements As at 31 December 2008 1-5 Over years 5 years
No maturity
Total
55,118
-
-
-
-
55,118
7,784 62,902
261,010 83,584 167,809 22,113 4,769 539,285
5,000 300,000 305,000
642,199 642,199
4,076 515,000 85,388 604,464
261,010 83,584 175,593 22,113 4,769 9,076 515,000 85,388 300,000 642,199 2,153,850
-
14,787 7,666 2,039 450,000 -
3,073 1,850,000 25,600
200,000 -
-
14,787 7,666 5,112 2,500,000 25,600
-
474,492
761 1,879,434
200,000
-
761 2,553,926
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(Unit: Thousand Baht)
Financial assets Cash and cash equivalents Securities purchased under resale agreement Current investments Trade accounts receivable - net Short-term loan to an unrelated party Dividend receivable from a related party Other receivables - related parties Restricted bank deposits Investments in subsidiaries Long-term investments Long-term loan to related party Other receivable Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Payable for purchase of fixed assets Liabilities under finance lease agreements Long-term loans from financial institutions Retentions payable Rental guarantees received from related parties (1)
Separate financial statements As at 30 September 2008 1-5 Over years 5 years
At call
Within 1 year
No maturity
38,549
90,000
-
-
-
128,549
3,495 42,044
85,000 143,522 174,116 8,800 (1) 28,050 6,867 536,355
5,000 300,000 305,000
642,199 642,199
4,076 515,000 85,388 604,464
85,000 143,522 177,611 8,800 28,050 6,867 9,076 515,000 85,388 300,000 642,199 2,130,062
20,010 -
14,697 10,039 2,008 375,000 -
3,592 1,875,000 24,496
400,000 -
-
20,010 14,697 10,039 5,600 2,650,000 24,496
20,010
401,744
761 1,903,849
400,000
-
761 2,725,603
Total
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Annual Report 2008 (October - December 2008)
107
40.4 Foreign currency risk Subsidiaries have foreign currency-dominated assets and liabilities, giving rise to an exposure to changes in foreign exchange rates. Management therefore considers 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 since the management considers that such foreign currency-dominated assets and liabilities are not material. As at 31 December 2008 and 30 September 2008, the subsidiary s foreign currency-denominated assets and liabilities, which were not hedged by any derivative contracts, were as follows. Foreign currency
Outstanding balances As at 31 As at 30 December 2008 September 2008
Liabilities Australian dollar
388,275
388,275
Exchange rates As at 31 As at 30 December 2008 September 2008 (Baht per one foreign currency unit) 24.3809
27.5083
40.5 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 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, securities purchased under resale agreement, investments, trade accounts receivable, service income receivable, and short-term and longterm lendings approximate their respective carrying values since the values of such financial instruments are predominantly subject to market interest rates and/or have maturity periods of less than 1 year with the exception of long-term loan to a related party, which bears fixed rate of interest and have repricing periods longer than 1 year. As at 31 December 2008 and 30 September 2008, there were no material differences between the carrying value of financial assets of the Company and its subsidiaries and their respective fair value, except that the fair values of the Company s long-term loan to a related party amounting to approximately Baht 287 million and Baht 285 million, respectively. The fair value of long-term loan to a related party is estimated by discounting the cash flows expected to be received by the Company on repayments of that loan by the current market interest rates. (b) Financial liabilities The fair values of financial liabilities, including trade accounts payable, advance received, short-term and long-term loans, liabilities under finance lease agreements and retentions payable, are the amounts as stated in the balance sheets due to the same reasons as described for financial assets with the exception of long-term loans from financial institutions bearing fixed rates of interest and having repricing periods of longer than 1 year. 108
Annual Report 2008 (October - December 2008)
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As at 31 December 2008 and 30 September 2008, there were no material differences between the carrying value of financial liabilities of the Company and its subsidiaries and their respective fair value, except for the Company s and it subsidiaries long-term loans from financial institutions having the fair values of approximately Baht 2,612 million and Baht 2,750 million, respectively (the Company only: Baht 2,433 million and Baht 2,544 million, respectively). The fair value of long-term loans from financial institutions is estimated by discounting the cash flows expected to be used to repay principal and interest to the lenders by the Company and its subsidiaries by the current market interest rates. 41.
Capital management The primary objectives of the Company and its subsidiaries capital management are to ensure that they have an appropriate capital structure and preserve the ability to continue their businesses as a going concern. As at 31 December 2008, total liabilities to equity ratio, determined from the consolidated financial statements is 0.53 (the separate financial statements: total liabilities to equity ratio is 0.48).
42.
Subsequent event On 29 January 2009, the Annual General Meeting of the Company s shareholders approved a dividend payment of Baht 0.25 per share for the period as from 1 october 2007 to 30 September 2008, totalling Baht 416 million, to the Company s shareholders. The Company paid such dividend on 20 February 2009.
43.
Reclassification Certain amounts in the financial statements for the year ended 30 September 2008 have been reclassified to conform to the current year s classification but with no effect to previously reported net income or shareholders equity. The reclassifications are as follows:
Trade accounts receivable Unbilled receivables Other current assets Property, plant and equipment - net Assets under concession contracts - net Liabilities under finance lease agreements
44.
Consolidated financial statements As previously As reclassified reported 196,202,899 256,350,128 60,147,229 42,712,685 43,094,130 6,759,953,129 6,758,953,129 381,006,132 382,006,132 7,861,830 8,243,275
(Unit : Baht) Separate financial statements As previously As reclassified reported 33,094,427 33,475,872 5,600,435 5,981,880
Approval of financial statements These financial statements were authorised for issue by the Company s Board of Directors on 27 February 2009.
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Annual Report 2008 (October - December 2008)
109
Related Party Transactions The company and its subsidiaries have entered related party transactions with persons subject to conflicts of interest (as of December 31, 2008) which include water sold to and services provided for major shareholders as indicated in the Notes to Financial Statements. Details of other related party transactions. Tab water production and water works system maintenance services for Egcom Tara Co., Ltd. Details of related party transactions: Between Universal Utilities Co., Ltd. (UU), a company s subsidiary, and Egcom Tara Co., Ltd. The company and Electricity Generating Public Company Limited (EGCOMP) held 15% shares respectively in Egcom Tara Co., Ltd. EGCOMP held 17.89% shares in the company as of 14 November 2007. Nature of related party transactions: UU provided services to Egcom Tara Co., Ltd., i.e., production of tap water and tap water production system and pipeline maintenance for Lak Muang and Ratchaburi and Samut Songkhram Provinces. Service fees were charged according to a contract awarded by open bidding. Value of related party transactions: During 1 October 2008 31 December 2008, UU received service fees from Egcom Tara Co., Ltd. in the amount of 9.34 million Baht. Trend or Policy Regarding Future Connected Transactions: As for future connected transactions, the company will ensure that transactions are at fair prices according to normal market conditions. The company will abide by laws governing securities and securities exchange, regulations, notifications, orders or requirements set forth by the Securities Exchange of Thailand, including those concerning information disclosure of connections and acquisitions or sales of the company s significant assets. In the event future connected transactions with persons subject to conflicts of interests or with stakeholders, the company will disclose the information in the Notes to Financial Statements that are audited by the company s auditor.
Auditor’s Fee A resolution was passed by the ordinary general shareholders meeting on January 24, 2008 to appoint Mrs. Saifon Inkaew, License No. 4434 or Ms. Rattana Jala, License No. 3734 or Mrs. Kamonthip Lertwitworathep, License No. 4377 the Company s Auditor. One of these three persons has audited Company s financial statements for the 3month period starting on 1 October 2008 and ending on 31 December 2008 and provided opinions on behalf of Ernst & young Office Limited. The Auditor s fee exclusively for the Company was set at Baht 348,000 (the total Auditor s fee for both the Company s financial statements and the consolidated financial statements was Baht 1,076,000).
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Annual Report 2008 (October - December 2008)
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General Information Eastern Water Resources Development and Management Public Company Limited Core Business
Head Office s Address Company Registration Tel. Fax. Company s common stock
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 jointventure projects with private sector. 1 Vibhavadi Rangsit Soi 5, Vibhavadi Rangsit Road, Jompphon, Jatuchak, Bangkok 10900 0107539000316 (instead of PCL.632) (662) 272-1600 (662) 272-1601-3 Company s Registered and Paid-up Capital as of 31 December 2008: Registered Capital: 1,663,725,149 shares, with par value of 1 baht/share and the total value of 1,663,725,149.- Baht Paid-Up Capital 1,663,725,149 shares, with par value of 1 baht/share and the total value of 1,663,725,149.- Baht
List of companies with at least 10% stockholding Company Name
Paid-up Registered Stock holding Type of Stock Capital Ratio (%) (Million Baht)
Type of Business
Universal Utilities Company Limited (UU) 1 Eastwater Building, FL.23-25 Vibhavadi Rangsit Soi 5, Jomphon, Jatujak, Bangkok 10900 Tel : 02-2721688Fax : 02-2721690 2
Waterworks management and Common wastewater treatment management in the form of concession contracts management contract or management lease contract
Water Trades and Services Co.,Ltd. 1 Soi Vibhavadi Rangsit 5, Vibhavadi Rangsit road, Khwaeng Jomphon, Khet Jatujak, Bangkok 10900 Tel: (662) 272-1600 Fax: (662) 272-1602
Drinking water-vending machine business
Nakornsawan Water Supply Co.,Ltd. 1 Eastwater Building, FL.23-25 Vibhavadi Rangsit Soi 5, Jomphon, Jatujak, Bangkok 10900 Tel : (056) 355-789 and (662) 272-1688 Fax : (662) 272-1690 2
510
100
Common
5
100
Waterworks management including Common tap water production and supply to Nakhonsawan Waterworks and water users services.
40
UU Co.,Ltd. holding 99.9999875 shares
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Annual Report 2008 (October - December 2008)
111
Company Name
Type of Business
Type of Stock
Paid-up Registered Stock Holding Capital Ratio (%) (Million Baht)
Bangpakong Water Supply Co.,Ltd. 1 Eastwater Building, FL.23-25 Vibhavadi Rangsit Soi 5, Jomphon, Jatujak, Bangkok 10900 Tel : (038) 840-786 and (662) 272-1688 Fax : (662) 272-1690 2
Waterworks management including Common tap water production and supply to Bangpakong Waterworks and water users services.
40
UU Co.,Ltd. holding 98.999925 shares
Chachoengsao Water Supply Co.,Ltd. 1 Eastwater Building, FL.23-25 Vibhavadi Rangsit Soi 5, Jomphon, Jatujak, Bangkok 10900 Tel : (038) 814-428 -9 and (66)272-1688 Fax : (038) 814-429 and (662) 272-1690 - 2
Waterworks management including Common tap water production and supply to Chachoengsao Waterworks and water users services.
100
UU Co.,Ltd. holding 98.99997 shares
Egcom Tara Co.,Ltd. Production and supply of tap water Common EGCO Tower, 222 Moo5, Vipavadee Rangsit Road, Tungsonghong, Laksi, Bangkok 10210 Tel: (662) 998-5000, (662) 998-5999 Fax: (662) 955-0945
345
15
References Securities Registrar (Common Stock) Securities Depository Co., Ltd. (Thailand) 62 The Stock Exchange of Thailand Building FL. 4,6,7 Ratchadapisek Road, Khlongtoey Bangkok 10110 Tel: (662) 229-2800, 654-5599 Fax: (662) 359-1259 Accounting Auditor
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Annual Report 2008 (October - December 2008)
Ernst & Young Office Limited 193/136-137 Lake Rajada Office Complex, FL. 33 Rajadapisek Road, Khwaeng Khlongtoey, Khet Khlongtoey , Bangkok 10110 Tel: (662) 264-0777 Fax: (662) 264-0789
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First 10 Major Shareholders as of 7 January 2009 No.
Shareholder
Number of Shares
Percentage
1
The Provincial Waterworks Authority
668,800,000
40.20%
2
The Electricity Generating Public Company
311,443,190
18.72%
168,372,100
10.12%
Limited (EGCO) 3
Norbax Inc.,13
4
The Industrial Estate Authority of Thailand
76,000,000
4.57%
5
State Street Bank and Trust Company for London
39,347,300
2.37%
6
Thai NVDR Company Limited
31,098,350
1.87%
7
Morgan Stanley & Co. International Plc.
29,918,000
1.80%
8
Somers (U.K.) Limited
22,313,700
1.34%
9
Aberdeen Growth Fund (Open-end Fund)
22,124,800
1.33%
10
Aberdeen Long Term Equity Fund (Open-end Fund)
16,875,500
1.01%
11
others (2,286 shareholders)
277,432,209
16.67%
1,663,725,149
100.00%
Total
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Annual Report 2008 (October - December 2008)
113
Dividend Payment Policy The Company has a policy to propose to the shareholders meeting to consider paying dividend at no less than 30% of the net profit of the consolidated financial statements after deduction of the reserve as required by the law and of other necessary items as the Company deems appropriate.
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Annual Report 2008 (October - December 2008)
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Connected Transactions Eastern Water Resources Development and Management Public Company Limited had one connected transaction in 2008 to be disclosed as required of a listed company as follows: The Company sold raw water to six waterworks under the Provincial Waterworks Authority, namely Laem chabang, Pattaya-Na Klue, Sriracha, Banchang, and Chonburi Waterworks and Nong Klang Dong Purification Plant, to be used for production of water, which is used for consumption and sold to the general public, the business sector, and Laemchabang Industrial Estate operating for supplying to the Industrial Estate in Laemchabang area. The price was adjusted to come down to 7 Baht per cubic meter from May to December 2008. Such transaction was a normal business transactions without trading conditions. Details are as follows: Date of Transaction and Parties Involved 1. Dates of Transaction: May-December 2008 2. Parties involved: Seller: Eastern Water Resources Development and Management Public Company Limited Buyers: Provincial Waterworks Authority and Industrial Estate Authority of Thailand Value of Transactions and Valuation Criteria The value of transactions in the Company s sale of raw water to six waterworks and Laemchabang Industrial Estate at 7 Baht/m.3 during May-December 2008 amounted to 329.84 million Baht or 5.95% of its net tangible assets as of 31 March 2008. Details of Connected Parties 1. PWA, a shareholder of the Company held 668,800,000 shares (40.20%) of the Company as of 30 June 2008. 2. The Industrial Estate held 76,000,000 shares (4.57%) of the Company as of 30 June 2008 3. Pol. Lt. Gen. Somyot Poompanmoung was holding the position of PWA director and Company director 4. Mr. Nattachak Pattamasingh Na Ayuthaya was holding the position PWA director and Company director 5. Mr. Chakarn Saengruksawong was holding the position PWA director and Company director 6. Mrs. Monta Pranootnorapal was holding the position of the Governor of IEAT Nature of Transactions and Connected Parties Interest Such transactions are considered to be a transaction prescribed in the notification of SET regarding disclosure the information and operation of the listed company in categories of connected transactions B.E. 2546 as normal business transactions without trading conditions. The Company requested for and was granted shareholders approval of such transactions in the Extraordinary General Shareholder Meeting No. 2/2008 on 25 August 2008.
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Annual Report 2008 (October - December 2008)
115
Activities in 2008 Personnel As of 31 December 2008, there were 138 employees with 136 being permanent employees, and 2 being employed on contracts. Of the 128 permanent staff, 10 were executive members. Human Resource Development Policy The Company s vision is to be a leader in valued water management for sustainable economic and social progress . Moreover, one of the Company s strategies is to be a learning organization that emphasizes continuous development. The Company gives significant importance to human resource development which aims at developing the employees to their full potential by enhancing their knowledge and competence, promoting their career advancement, and offering them appropriate compensation. Other measures include improvement of quality of life values and environment and integrated enterprise system development. In addition to providing training, the Company s personnel development scheme includes in-company learning and overseas study trips to expand their knowledge and perception, and apply what they learned from the trips to further develop their work. This is because the Company realizes that employees are valued assets and a key driving force that helps the Company to achieve its business goals. The Company therefore has made it a policy to support personnel development at all levels. This means general work skills as well as specialized knowledge and technology required for different aspects of work. Emphasis is also placed on development of work behavior, which is a core competency, to be consistent with the Company s vision, mission, and corporate value. The Company promoted and supported personnel development in various aspects as follows: 1. A budget has been allocated for internal training, external training by sending employees to attend training programs organized by reputable institutions, and continued learning for work management skills development for employees at all levels on a continuous basis. 2. Management Skills Development Program for the members of the Management and supervisors through the Preventive Internal Control Course in support of the Principles of Good Corporate Governance. 3. On going English training programs for employees at the mid-management level, including Presentation Skills development. 4. Information Technology Training Program has been organized for employees to be prepared for the Internal Electronic Document System and the ERP System. 5. Engineering Technical Training Program, such as the training course on the application of mathematical models (Epanet) as a skill development for operations personnel. 6. Training and dissemination of news on quality, environment, and occupational health and safety, Labor Protection Act (No. 2) B.E. 2551 in compliance with the law and regulations and in line with its quality standards. 7. Promotion and support are given to employees to learn and acquire knowledge on their own to increase their competencies and work efficiency. 8. Activities to promote team working, such as the Team Building activity jointly organized with the Chulachomklao Royal Military Academy in line with East Water s values. 116
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Water Management Capacity Increase In 2008 the Company increased its water management capacity in various aspects to meet the increasing demand for water in the Company s service areas as follows: Water Resource Capacity Increase: The Company made application to the Royal Irrigation Department for permission to use more water from the Dok Krai Reservoir and the Prasae Reservoir as its water resources. An alternative water resource plan was drawn up to be used as a guideline for the development of alternative water resources in the future. Aiming at reducing the risk of dependence on the government source of raw water (Royal Irrigation Department), the plan includes matters such as the purchase of water from private earthen wells, construction of new storage reservoirs, and the construction of a plant for the production of fresh water from seawater. Pipeline System Capacity Increase: The Company spent over 170 million Baht for the improvement of the main pipelines in Chon Buri, Rayong and Chachoengsao Provinces to increase their water distribution and pumping capacity. In 2009 there is a plan for the construction of the third Nong Pla Lai Map Tha Phut pipeline to meet the increase in household water consumption and the demand of the industrial sector in Sattahip and Map Tha Phut. The cost of investment is estimated to be over 1,700 million Baht. Water Management Capacity Increase: The Company planned to pump and distribute water in accordance with the water situation and the climatic conditions by referring to the El Nino and La Nina phenomena. Information obtained from local and international agencies was also used to make plans regarding water pumping from different sources. In 2009 the Company has a plan to develop a mathematical model for water resource management and water demand management, to be prepared for interconnections of water resources in the future.
Business Development With the experiences of the Company and its subsidiaries in water management and tap water supply, the Company has a policy to explore and develop businesses related to the concept of integrated water management. The objective is to look for opportunities to expand the scope of business beyond the raw water and tap water business to meet the diverse and comprehensive demand for water resources from the domestic and industrial sectors. With the increase in the energy cost, the Company has also studied the feasibility of investment in the energy business, with emphasis on alternative energy, to have more sources of income and minimize the reliance solely on the revenue from water businesses. Moreover, the Company has also explored the opportunities for investment in other countries such as Vietnam, China, India, Loas, and other countries with potential for the water and alternative energy businesses.
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Annual Report 2008 (October - December 2008)
117
Customer Relationship Management Service Excellence In 2008, East Water did not only change its corporate identity but also modified its management structure. The Sales and Marketing Division was established under the Marketing Communications Department to focus on reaching out to customers and strengthen the relationship with them, because the Company believed that understanding and participation would result in good relationships, business strength, and customers confidence in the brand of East Water. A Customer Service Team (CST) was established consisting of personnel from sales, operations and planning departments. The CST will listen to, follow up, rectify and manage customers problems systematically and efficiently. Moreover, there were other activities to build up good relationships with customers and follows:
An annual event to thank water users was held to allow the Company s management to meet all water users and keep them informed of the Company s activities.
Social functions with executives of water users were organized to allow top management of both sides to meet and share their views and recommendations. These events provided opportunities for business expansion and opened up direct communication channels between top management. 118
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Anniversary celebration events of various agencies such as the Irrigation Department, Provincial Waterworks Authority, Industrial Estate Authority of Thailand, and Hemarat Land Development Public Company Limited
Joint activities with customers for improvement of quality of life values and the environment The Green Hospital Project with Queen Sirikit Hospital to promote planting of trees and economical use of natural resources
Beautiful Canal, Clean Water and Care for the Environment Program to promote the use of microorganisms for community wastewater treatment in the Laem Chabang Municipality.
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Annual Report 2008 (October - December 2008)
119
Quality of Life Values and Environment Community engagement high on agenda Participation of the public sector and the community was the key factors behind the success of the Company s quality of life values and environment development program in 2008 (October-December 2008). East Water Young Leaders Camp and Scholarships East Water has a policy to place emphasis on education of youths in its operating areas, believing that they strengthen their local communities in the future. In view of this, in 2008 (October December) the East Water Young Leaders Camp for Conservation of Water Resources and Environment Project was organized in Chachoengsao and Chon Buri Provinces, a continuation of the first program in Rayong Province. A total of 360 teachers and students from 60 schools in Chachoengsao and Chon Buri Provinces participated in the program. Each of the students attending this camp received a scholarship of 10,000 Baht. Clean Water for the Community Project Recognizing the value of the water resources with an effort to minimize the impacts to the community, East Water had organized the following activities: Drinking water mobile units to provide drinking water to 40 areas in communities experiencing shortages of clean water, including various agencies in and outside the Company s operating areas.
Providing over 72,500 number of cupped water in support of activities for public benefits organized by various agencies/organizations.
In addition to the above mentioned programs, East Water also provides support to quality of life values development activities organized by government agencies, or charity organizations such as sponsorship for the Kathin (robe presentation at the end of the Buddhist Lent) ceremony at Khao Pho Temple (Mab Kha community), the Pha Pa (offseason robe presentation) ceremony with residents of Prasae community, the Buddha image casting ceremony with the Nikhom Phattana District, the Luang Pho Sothon festival in Chachoengsao Province and participation in the cleaning activities of the Map Kha community. 120
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