pttch : Annual Report 2007 by pttgc group

2007 ANNUAL REPORT PTT CHEMICAL PUBLIC COMPANY LIMITED

CONTENTS

001

Vision / Mission

002

Financial Key Figures

004

Message to Shareholders

014

Business Value Chain

015

Operating Results

023

Investment Roadmap

024

Collaborative Innovation

026

Value-Based Organizational Effectiveness

028

Achievements of the Year

029

Shaping an Innovative Society

032

Subsidiaries, Affiliates, and Revenue Structure

034

Shareholding Structure

035

Organization Structure

036

Board of Directors

044

Management Team

050

Management Structure

063

Report of the Corporate Governance Committee

065

Report of the Nominating Committee

066

Report of the Remuneration Committee

067

Report on Corporate Governance

079

Risk Factors

085

Connected Transactions

095

Management’s Discussion and Analysis

105

Audit Fees

106

Report of the Audit Committee

108

The Board of Directors’ Report on its Responsibility to Financial Report

110

Auditor’s Report

112

Financial Statements and Notes to the Financial Statements

175

Abbreviation and Glossary

177

Company Information

179

The Dividend Payment Policy

VISION

LEADER AND INNOVATIVE CHEMICAL COMPANY

MISSION

• PTT FLAGSHIP IN OLEFINS BUSINESS

• DIVERSIFIED AND INTEGRATED CHEMICAL COMPANY

• SUPERIOR BENEFITS TO STAKEHOLDERS

• MARKET BACK AND INNOVATION DRIVEN COMPANY

• KNOWLEDGE BASED ORGANIZATION

• TRUSTWORTHY COMPANY TO STAKEHOLDERS WITH SAFETY RESPONSIBILITY AND ENVIRONMENTAL CARE

PTT CHEMICAL PUBLIC COMPANY LIMITED

2007 FINANCIAL KEY FIGURES

Unit : Million Baht

Year 2006

Year 2007

Total Assets Total Liabilities Total Shareholderâ&#x20AC;&#x2122;s Equity Total Revenues Net Earnings (Loss)

FINANCIAL RATIOS Current Ratio (times) EBITDA to Revenue (%) Net profit on Revenues (%) Return on Total Assets (%) Return on Equity (%) Net Debt to Equity (times) Net Income (Loss) Per Share (Baht) Book Value Per Share (Baht)

Unit : Million Baht 133,513

111,531

73,819

2006

2007

TOTAL ASSETS

2006

77,111

2007

TOTAL REVENUES

18,282

19,167

2006

2007

NET EARNINGS (LOSS)

2007 ANNUAL REPORT

TOTAL REVENUES

No.

PRODUCTION OF OLEFINS

77,111

Million Baht

ASSETS GROWTH

111,531

133,513 Year : 2007

PRODUCTION CAPACITY (NAMEPLATE)

Million Baht

Unit : TPY

1,276,000

Olefins

1,713,000

437,000

%THYLENE Polymers

Unit : TPY

EO Based Performance

0ROPYLENE Unit : TPY

MEG

HDPE

500,000

300,000 DEG / TEG

30,000 / 1,500

Oleochemicals

Unit : TPY

200,000 FA

ETHOXYLATES

50,000

100,000

ISO 9001 : 2000

ISO/IEC 17025

ISO/14001 TIS 18001

QUALITY CERTIFICATION

LABORATORY QUALITY CERTIFICATION

OCCUPATIONAL HEALTH, SAFETY, AND ENVIRONMENT CERTIFICATION

PTT CHEMICAL PUBLIC COMPANY LIMITED

MESSAGE TO SHAREHOLDERS

Domestic Market Share

NO.

Market Capitalization more than

1 of Top 10 150,000 Million Baht

in Market Capitalization on SET

DEAR SHAREHOLDERS

The performance of PTT Chemical in 2007 was remarkable. The Company showed outstanding operating results and significant growth in revenue and profits compared with the previous year - a result of our business expansion and diversification as well as our “customer-centered” strategy. Our production base and markets expanded beyond our expectations and efficiency has improved in both organizational structure and human resources. In addition, the Company has initiated and managed stakeholder-related projects, particularly Corporate Social Responsibility (CSR) projects. The dedication and commitment of our personnel, at all levels, was undoubtedly the major factor leading us to success.

EXCEEDING GOALS

Our revenue and net operating profits exceeded expectations this year because of elevated product prices worldwide, higher capacities, greater efficiency in capacity utilization, and successful business expansion. Olefins prices in 2007 remained elevated, producing a spread margin of more than USD 500 per ton between olefins and feedstock. Our 40% share of the olefins market kept PTT Chemical in No. 1 place. Early in 2007, we shut down the I-4 olefins plant to carry out our capacity expansion plans as well as scheduled maintenance and we pleased to report that the impact on operations was minimal because of the efficiency of the expansion activities.

HIGH-EFFICIENCY OPERATION

All three business groups achieved outstanding profit growth as well as business expansion in accordance with our targets. The polymers group scored spectacular profit growth primarily as a result of a 17-year-high price for HDPE. The same went for our ethylene oxide business group, whose MEG prices have kept rising since mid-2007. The group still has the lion’s share of the MEG domestic market share and showed high process efficiency throughout the year and exceeded its targets in many areas. The commissioning of the Thai Ethoxylate plant, a joint venture with Cognis Thai Ltd., added value to ethylene oxide by producing fatty alcohol ethoxylates, an essential ingredient of home, health, and personal care products that had previously been imported. This helped reduce the nation’s imports by approximately Baht 13 billion. Finally, our oleochemicals business group met all its goals. In plant construction - methyl ester has been in production since December 2007 - in feedstock sourcing, and in domestic and international negotiation with business partners. PTT Chemical’s integrated oleochemicals production is set to begin in 2008.

PTT CHEMICAL PUBLIC COMPANY LIMITED

RESPONSIBILITY TO SHAREHOLDERS AND BUSINESS PARTNERS

Building on complete and integrated chemicals – derived from petrochemicals and agricultural products – PTT Chemical created value from the upstream to the downstream sector for the benefit of customers and downstream end-users alike. At the same time, our business is equipped to cope with worldmarket product price volatility. This ability has led to continued security, growth, profitability, and balance for the Company – crucial evidence of our responsibility to shareholders. We have also restructured the Company for sophisticated management processes to efficiently sustain business advancement as well as develop a network of affiliations with academic institutions and other bodies to support research and development. With our proactive operating strategy, we will be able to make products ideally suited to our customers’ needs, support growth, and prepare to compete in the world arena, which is highly dynamic and competitive. Last but not least, we strive to upgrade our people’s personal and career advancement.

COMMITMENT TO TRANSPARENCY AND FAIRNESS

Committed to international practices of good corporate governance, PTT Chemical treats all stakeholders with fairness and discloses its information in a transparent and timely way. With our current market capitalization of more than Baht 150 billion, we are among the top ten companies on the Stock Exchange of Thailand (SET). It is therefore our duty to treat all shareholders with fairness. Our first priority is to give shareholders ready access to clear, transparent, and timely information. We allow shareholders to propose agenda items and to nominate candidates for directors to the annual general meeting of shareholders in advance. In managing risks, the Board of Directors has set a policy and ensured systematic risk management throughout the Company while in expanding our business to downstream, we have focused on reducing business risks and generating secure revenue.

BUSINESS SHAPING AN INNOVATIVE SOCIETY

PTT Chemical views local communities and the wider society as our partner and extends its mission of value creation to improve sustained development. Thanks to the Company’s commitment to being a good upstream company in search of fertile ground and innovative value downstream, we have taken action to preserve value at all stages of operation in tandem with the conservation and selective blending of values, to strike a sustained balance between business and society under the concept of ‘Shaping an Innovative Society’. To this end, we actively promote a better quality of life for communities and society through environmental stewardship, educational upgrading, and community services that would prove sustainable.

Recognizing that our resounding success this year resulted from the cooperation of all involved, in particular the management and staff who have put in their best efforts and are now ready to take the Company to a better tomorrow, the Board of Directors would like to express its sincere thanks and appreciation to them and all other stakeholders. We pledge to remain steadfast to the vision and missions of PTT Chemical to foster value and prosperity for both our business and society at large.

Mr. Pornchai Rujiprapa Chairman, Board of Directors 00

2007 ANNUAL REPORT

OUR PROMISE

The business driving force towards world-market leadership, with the promise of value creation. Through ideation, synergy, and collaboration, towards sustaining growth. PTT Chemical creating innovation added-value from the upstream to a fertile downstream.

POLYMERS PTT CHEMICAL PUBLIC COMPANY LIMITED LIMITED

EO-BASED PERFORMANCE

OLEOCHEMICALS

THE FUTURE IS NOW

Stable Growth, Market-Future Driven, and Catering to Customersâ&#x20AC;&#x2122; Needs while Fostering Business Sustainability.

2007 ANNUAL REPORT

Polymers

Market-Future Driven

PTT Chemicalâ&#x20AC;&#x2122;s commitment to addressing customersâ&#x20AC;&#x2122; needs, we have ventured into the downstream side of business. Equipped with innovations and market-back strategies, we strive to turn out products and keep abreast of end-users for their total satisfaction and mutual business sustainability.

PTT CHEMICAL PUBLIC COMPANY LIMITED

THE SKY IS THE LIMIT

Generating Revenue, Creating Value, and Attaining International Growth. We Seek to Grow and Venture into the International Market to Continue Building on the Value Added to Olefins, the Upstream Chemicals.

010

2007 ANNUAL REPORT

Value Creation

> > >

Adding value to EO product line, focusing on providing customer solutions Evolving EO and EG derivatives in response to speciďŹ c demand Expanding EG product line capacity, particularly MEG, in response to market needs while adding further value to oleďŹ ns products and diversifying value for chemical industry

EO-Based Performance

PTT CHEMICAL PUBLIC COMPANY LIMITED

011

REFRESHING THE WORLD WITH CARE

Expanding to Bio-based Chemicals. Forging Business Alliance for Growth in Emerging Markets.

012

2007 ANNUAL REPORT

Oleochemicals

Green Solutions

Creating new opportunities for Thailand: > Pioneer of domestic oleochemicals business, ready to take on the world > Producer of chemicals derived from nature, mainly from domestic raw materials > Focus on specialty chemicals market to add value to products > Create business alliances to strengthen business > Diversify product portfolio through expansion to bio-based chemicals

PTT CHEMICAL PUBLIC COMPANY LIMITED

013

BUSINESS VALUE CHAIN

OLEFINSSHARED FACILITIES

Olefins Utility

POLYMERS

EO-BASED PERFORMANCE

OLEOCHEMICALS

OTHERS

HDPE

Ethylene Glycol

Fatty Alcohols

Environment

(High Density Poly-

Applications :

ethylene)

Polyester Fiber,

Home, Health &

& Safety

Applications :

PET Bottle

Personal Care Products

Ethoxylate

Glycerin

Plastic Bags, Rope,

Jetty & Buffer Tank Farm

SERVICES &

Plastic Containers

Maintenance & Engineering

Applications :

LDPE

Shampoo, Liquid Soap

Healthcare, Food,

VCM & PVC

(Low Density Poly-

& Detergent

Phamaceutical

(Vinyl Chloride Monomer & Poly Vinyl Chloride)

ethylene) Applications :

Ethanolamine

Methyl Ester

Applications :

Film, Coating, Fiber,

Applications :

Construction Materials,

Cable, Plastic Bags

Conditioners, Softener

Bio-diesel Additive

Plastic Containers, Pipe

(Under Construction)

& Cosmetics

Phenol

LLDPE

Choline Chloride

Applications :

(Linear Low Density

Applications :

CD, Electrical Appliances

Polyethylene)

Chicken & Pig Feed Mills

Applications :

Piping & Pipeline

Film, Bag, Toy, Tank

Transportations

(Under Construction)

Logistics Noncore Business

014

2007 ANNUAL REPORT

OPERATING RESULTS

TEA TOCGC Expansion

Uprate GTG-D Debottleneck I-4/1 SWRO

PROJECTS MILESTONE

Debottleneck I-4/2 HDPE Expansion

TOL-Methyl Ester Uprate GTG-C

BPE Expansion PTTPE Cracker+LLDPE

TCC

TOL-Fatty Alcohols

PTTPE -LDPE

Year Q1

2008

2 007

20 09

2010

Olefins & Shared Facilities

World-class Efficiency and Potential • Raise production efficiency to support growth and competition in the diverse downstream petrochemical arena • Maintain production and distribution security to gain customers’ trust. HIGHLIGHT

2007 PERFORMANCE

The Company’s policy is to focus on continuously fostering competitiveness by flexibility feedstock, having competitive costs, and diversified business from upstream to downstream. In this case, managed well, this could bring management stability and choices amid uncertainty. To this end and to create value, PTT Chemical took the following action:

• Plant I-4/1 Debottlenecking Project: This low-investment project kept the unit cost down for the

olefins unit, making it more competitive. On stream in July 2007, the project raised the ethylene

capacity by 130,000 tons per year and propylene capacity by 60,000 tons per year. The nameplate

capacities for the two products are now 1,276,000 and 437,000 tons per year respectively –

making PTT Chemical the major olefins producer in Thailand.

PTT CHEMICAL PUBLIC COMPANY LIMITED

015

• Uprate GTG-C, GTG-D Project: This project was designed to raise combustion efficiency in power

generation, lower nitrogen oxide emission, and, as a result, secure three megawatts (MW) to make

the Company’s capacity 212 MW from the fourth quarter of 2007. • Sea Water Reverse Osmosis (SWRO) Project: This represented a security measure for the industrial

water system for production processes, enabling them to operate with stability while lowering risks

from fresh-water shortage for the water production system. MAJOR PLANS

PTT Chemical intends to expand its olefins investment, including the Plant I-4/2 Debottlenecking II Project to add to the ethylene capacity by 100,000 tons per year and propylene capacity by 50,000 tons per year. Completion of the project is due in early 2009 and that of a 1,000,000-ton/year ethylene unit project also in 2009. Finally, a 300,000-ton/year LDPE unit and a 400,000-ton/year LLDPE unit are in the plan. MARKETING AND COMPETITION

• Olefins Business Olefins prices remained elevated, as it did in 2006, due to the record prices of crude oil and the maintenance shutdowns of Asian plants, both planned and unplanned. As a result, the volume of olefins taken out of the Asian market amounted to about 1.64 million tons this year despite steadily growing demand in the region and continued export growth. Despite the commissioning of a major capacity in Taiwan, that project already had downstream products lined up, leaving the market intact and relatively mild regional competition. Producers’ profitability remained healthy, with the spread between ethylene and naphtha prices averaging 503 USD/ton. Thailand’s olefins market in 2007 saw about 185,000 tons of demand rising from the previous year, virtually all of which resulted from the rising ethylene demand, as many downstream petrochemical plants were expanding in capacities. In addition, those that had come on stream in 2006 were putting their production into full gear, including those belonging to Bangkok Polyethylene Plc (BPE), Vinythai Plc (VNT), and TOC Glycol Co., Ltd. (TOCGC). At the same time, the supply of olefins fell from the previous year by about 88,000 tons, as the Company’s I-4/1 and I-4/2 plants underwent planned maintenance shutdowns. Once these resumed their production, they went full-steam, with the former producing from its expansion unit as well. PTT Chemical’s market share was about 40% and Thailand’s net ethylene import amounted to roughly 50,000 tons.

• Utility Business Since this business in Thailand predominantly falls under concessions, competition is relatively mild. Nevertheless, with emerging petrochemical projects in the near future, greater demand for utilities is inevitable, while permissions for setting up power and steam plants are made increasingly difficult by potential environmental issues. As a result, PTT Chemical has systematically lined up its utilities to sustain the higher demand for its affiliates and others within its concessions. 016

2007 ANNUAL REPORT

Polymers

• Introduce more products to address customers’ diverse needs while providing services to improve

Stable Growth, Market-Future Driven

HIGHLIGHT

product quality through domestic and international distribution channels • Grow steadily and invest in competitive projects with a goal to become Asia’s major supplier by 2010 • Develop products with customers through ‘market-back to product development’. 2007 PERFORMANCE

PTT Chemical aims to maintain a steady growth rate in tandem with the expansion of olefins capacities to continuously raise its competitive edge while expanding its investment to diverse downstream petrochemical industries. At the same time, it strives to get ready for new marketing, technology, and service capabilities to support sustainable development and keep in step with consumers’ needs. Therefore, during the year the Company focused on both investment and ongoing production while actively determining aggressive marketing strategies. Here are the highlights:

• HDPE polymers produced by the PTT Group involving BPE and PTT Polymer Marketing Co., Ltd.

(PTTPM) achieved international-standard production, including RoHS (Restriction of Hazardous

Substances) and the US Food and Drugs Administration. Reflecting our quality, safety standards, and

environmental friendliness, such achievement fostered PTT Chemical’s confidence and competitive

edge for its exports to the world market.

MAJOR PLANS

• The Company came up with a new trademark called InnoPlus, replacing NPCX and THAIZEX,

effective from 2008. The Company’s HDPE capacity is planned to rise from 500,000 to 800,000 tons per year together with LDPE and LLDPE capacity expansion from 300,000 and 400,000 tons per year respectively. These projects are due to come on stream in 2009. PTT Chemical also intended to develop a special grade of polymers in tandem with its quality upgrading of services and products to come up with products matching market needs and those of specialized customers.

PTT CHEMICAL PUBLIC COMPANY LIMITED

017

MARKETING AND COMPETITION

Polyolefins prices in 2007 reached 17-year peak prices, with HDPE and PP in the Southeast Asian market averaging 1,352 USD/ton and 1,337 USD/ton respectively. Profitability was remarkable, as seen in the spread between HDPE and ethylene of about 172 USD/ton and that between PP and propylene of about 183 USD/ton. As regards the prices of HDPE, crude oil and naphtha prices remained the major causes of its rising costs and prices. In addition, its general demand growth was healthy, particularly China’s demand (10.8%), which outpaced the rest of Asia (8.7%) and the world market (6.9%). Supply remained tight, however, as a result of plant maintenance shutdowns and certain HDPE projects in the Middle East being delayed from the on-stream dates of 2007. The domestic market for HDPE in 2007 saw a marginal rise in supply to 1,137,000 tons, accounted for by the full production of BPE’s expansion unit, which had begun production in mid-2006. Meanwhile, the domestic demand rose by 6% to about 625,000 tons, signifying a revived market after two years of market depression. Thailand’s net HDPE export amounted to about 512,000 tons.

018

2007 ANNUAL REPORT

EO-Based Performance Products • Create greater value in the EO (ethylene oxide) product line by focusing on providing customers solution • Evolve EO and EG derivatives market to address specific groups of customers • Expand the capacity of the EG (ethylene glycol) product line in response to market needs, in particular

Generate Revenue and Value Creation

HIGHLIGHT

MEG, while building on the values added to olefins and fulfilling values for downstream products in

diverse ways.

2007 PERFORMANCE

Commissioned in the third quarter of 2006, ethylene oxide production went ahead at full steam through 2007, which proved timely for PTT Chemical because of the tight MEG supply. Product prices showed dramatic improvement in the latter half of 2007. As a result, the performance by this business group exceeded its revenue goals while expanding into MEG product for downstream domestic industries, with more than Baht 13 billion generated in export revenue. Such production and tight product supply, coupled with PTT Chemical’s policy to sell EO/EG products to domestic operators first at competitive prices and commercial conditions while favoring its business partners, have enabled it to compete well with other operators in the domestic market – topping the domestic market through: • Delivery of products less likely to be contaminated than imported products • Faster order and product delivery than other distributors • Ability to continuously load products from storage tanks, fostering confidence in delivery to

consumers. Meanwhile, the surplus EO/EG volumes were exported to Asian customers, primarily China, which boasted a higher demand for EG products than others. During the year, the Company also produced fatty alcohol ethoxylates with a nameplate capacity of 50,000 tons per year. This was the operation of Thai Ethoxylate (TEX), a joint venture between the Company and Cognis Thai Ltd., a major producer of specialty chemicals worldwide.

PTT CHEMICAL PUBLIC COMPANY LIMITED

019

MAJOR PLANS

In the pipeline are plans to expand the MEG capacity and develop EO derivatives: • The MEG capacity is set to rise by 30% or around 100,000 tons per year, scheduled for completion

in the fourth quarter of 2008. • The ethanolamines project, with a capacity of 50,000 tons per year, replaces imports of this

compound, an ingredient of hair conditioner, fabric softener, cosmetics, drugs, etc. Commissioning is

due in the fourth quarter of 2008. • The choline chloride project, with a capacity of 20,000 tons per year, replaces imports by using EO

as feedstock. Choline chloride is an essential ingredient for poultry and pork feed. During the year, a

plant was designed and constructed, with commissioning set for the first quarter of 2009.

MARKETING AND COMPETITION

For 2007-2010, the global growth of polyesters was projected at 5.6-6.2%. Nevertheless, MEG producers are adding to capacities by about 2 million tons per year, causing more intense competition, particularly in China – the world’s biggest consumer and importer of MEG – and other Asian countries that continued to rely on MEG imports. The domestic market for MEG currently features about 400,000 tons per year in demand. Based on the economic projection for 2008, the demand growth for MEG should equal about 3% growth. While the overall expansion of the domestic market is not as spectacular as in other regions, major MEG producers value the Thai market and want to preserve their market shares here – and even expand them further. As a result, domestic competition is set to become more intense. Marketing and sales rivals in this sector consist of the world’s majors, namely SABIC, MEGlobal, and Shell, based in the Middle East and other countries. Each year, these players not only keep expanding their capacities for greater economies of scale, but also try their best to respond to the global demand. Today, SABIC, MEGlobal, and Shell delivered their MEG products to Thailand through both direct sales and agent sales. For the year, SABIC held 23%, MEGlobal 17%, and Shell 7% in market shares, whereas PTT Chemical held 52%.

020

2007 ANNUAL REPORT

Oleochemicals

Highlight

Green Solutions, Expanding to Bio-based Chemicals

• Pioneer the domestic oleochemicals business while getting ready to serve as the world’s leader • Produce chemicals derived from nature, mainly from domestic raw materials • Focus on the specialty chemicals market to add value to products • Create business alliances to foster business • Diversify product portfolio through expansion to bio-based chemicals • Steadily create revenue and growth.

2007 PERFORMANCE

• Construction for the methyl ester and fatty alcohols projects, with the first due for completion in

November 2007 and commissioning in early December 2007, and commissioning of the fatty

alcohols unit in April 2008, as scheduled • Completion of more than 5 million man-hours of construction without lost-time injuries as scheduled

and within budget • Conclusion of a supply agreement for raw materials to meet the Company’s requirements • Conclusion of an agreement with domestic and international business partners for nearly all products • Investment feasibility study for the downstream oleochemicals industry. MARKETING AND COMPETITION

Methyl Ester An essential ingredient of bio-diesel, methyl ester has garnered keen interest by worldwide investors over the past couple of years, contributed mainly by the following factors: • Continually rising world oil prices and political uncertainty in the Middle East, causing countries to

become aware of the need to find alternative sources of energy • EU member countries’ environmental policies resulting from the Kyoto Protocol, which in effect forced

all signatories to cut their emission of carbon dioxide, thereby steadily raising the application of

alternative energy and methyl ester • Tax subsidy measures for alternative energy, implemented by various countries, as seen in the drastic

progress of this business in countries where special tax conditions are given to alternative energy. PTT CHEMICAL PUBLIC COMPANY LIMITED

021

At any rate, toward the end of 2006, the world market for methyl ester began to fluctuate with the weakening oil prices and the sharply rising prices of raw materials, including assorted vegetable oil and palm oil, in particular. As a result, several methyl ester projects were abruptly suspended or revised. But on the whole, the situation for methyl ester and bio-diesel remained bright because demand still exceeded supply. Its main market is the EU, whose goal is to use 5.75% alternative energy by 2010. For the domestic market, past data showed that a steadily rising consumption of bio-diesel. Spearheaded by the Ministry of Energy, the government had a clear policy of stimulating the use of alternative energy. For 2007, the goal was to raise the domestic consumption of 5% bio-diesel (B5) through lowering its price below the regular diesel price. In addition, the ministry’s policy is to announce nationwide use of 2% bio-diesel (B2) on 1 February 2008, and to enforce the use of B5 nationwide in 2011, which is equal demand of methyl ester to 1.3 million tons per year or 4 million liters per day. Fatty Alcohols While bearing the brunt of sharply rising feedstock prices, in 2007 fatty alcohols saw its prices rising as well from the steadily rising demand. Several factors contributed to this market phenomenon: • The sharp rise in global demand for home, health, and personal care products, particularly China,

which is now the world’s major market for fatty alcohols • The elevated prices of crude oil and petrochemicals, which in turn made fatty alcohols derived from

petrochemicals more expensive than that produced from natural materials. Global consumption of fatty alcohols in 2007 was fairly balanced at 2 million tons, with 4% average growth in all regions. Recognize, however, that China’s fatty alcohols project is due for completion in

2-3 years, thereby potentially flooding the market. Aware of this trend, the Company is now investigating investment in related products to supplement further value. Glycerine A by-product of methyl ester, glycerine saw a volatile market during the past year. In the first half, its price was flat because of the rapid expansion in the bio-diesel market, whereas in the second half, the rapid price rises of raw materials, including palm oil and vegetable oil, forced several major bio-diesel plants around the world to suspend production or cut down on their capacities, thereby depressing the supply of glycerine and more than doubling its price. Nevertheless, in the longer time, mandatory consumption of bio-diesel in several countries will depress the price of glycerine. The Company has therefore conducted research to find other applications for glycerine, including the substitution for other chemicals, in the production of related chemical products.

022

2007 ANNUAL REPORT

INVESTMENT ROADMAP

Continuous Growth & Diversified Portfolios UPSTREAM

Nameplate Capacity (Tons/Year)

2007

2008

2009

2010

1,665,500

1,750,500

2,119,250

Debot. I4-1

Debot. I4-2

PTTPE

2,888,000

Olefins

512,000

493,250

Propylene Ethylene

449,500

422,000

2,376,000 1,243,500

1,626,000

1,301,000

DOWNSTREAM HDPE

500,000

635,000

830,000

• 250k BPE exp.

Polymers

• 50k HDPE Unit • 30k HDPE Iran

LLDPE

100,000

400,000

PTTPE

LDPE

75,000

300,000

EO-Based Performance

PTTPE

MEG

395,000

25,000

12,500

50,000

15,000

20,000

TOCGC Exp.

Ethoxylates

25,000

Ethanolamines

TEA

Choline Chloride

OleoChemicals

TCC

Methyl Ester / Fatty Alcohols

VCM

Others

323,750

300,000

27,583

331,000

100,000

30,000

60,000

TOL

100,000 200k VNT exp.

Phenol

PPCL

Note: • Subsidiaries and associates that PTTCH holds less than 50% are as follows: 1. HDPE Iran with HDPE Nameplate Capacity of 300,000 tons/year (PTTCH holding 10% hence effective capacity = 30,000 tons/year) 2. Vinythai with VCM Nameplate Capacity of 400,000 tons/year (PTTCH holding 25% hence effective capacity = 100,000 tons/year) 3. PTT Phenol with Phenol Nameplate Capacity of 200,000 tons/year (PTTCH holding 30% hence effective capacity = 60,000 tons/year) • Thai Ethoxylate with Ethoxylates Nameplate Capacity of 50,000 tons/year (PTTCH holding 50% hence effective capacity = 25,000 tons/year)

PTT CHEMICAL PUBLIC COMPANY LIMITED

023

COLLABORATIVE INNOVATION

PTT Chemical strives to form a network of cooperation, both domestic and international. As a result of evolving business circumstances, innovation is now a must, as is cooperation with allies to foster our potential for long-term competitiveness. The Company strives to form a network of cooperation, both domestic and international. Evolving business circumstances call for innovative management tools to make PTT Chemical competitive against business competitors across the globe. Meanwhile, new management tools are needed to enable extensive and cost-effective improvement of products. Innovations and alliance collaboration are therefore keys to fostering our potential for long-term competitiveness. Research and development (R&D) for innovations â&#x20AC;&#x201C; in both products and processes â&#x20AC;&#x201C; represents a modern approach for doing business in line with the trends and reality of markets because it supplements value while fostering diversity for products for emerging markets, as well as catering customersâ&#x20AC;&#x2122; needs, and generating income. The Company is undertaking open innovation projects to form a 24 024

nationwide and global R&D network through its cooperation with research institutes, universities, government agencies, and business allies in R&D on innovative derivative products in line with its business goals. In 2007, ten entities showed interest in this project, compared with four allies when the project was launched. The number of R&D projects has grown to 20, including: 2007 ANNUAL REPORT

PTT Chemical not only continuously develops its people, but also recruits those with knowledge and skills to supplement current personnel. In 2007, we hired more than 20 researchers with master’s and doctoral degrees to support the Company’s growth in new products while focusing on intellectual property management with an efficient management • Environmentally-friendly agricultural film • Integrated production of bio-diesel from Jatropha system and suitable strategies to protect our • Special wood materials made from wood scraps innovations while preventing infringement. The Company applies advanced technology in information and sawdust • Composite woodlike materials made from HDPE search on patents and in building on technology through patent mapping. A unit supports intellectual matrix with rubber-based additives property work for greater commercial applications. • Container and packaging development for In 2007, assorted R&D projects are evaluating the improved utilization. feasibility of their patent registration and assessing The Company’s also launch of Green Plastics, made the patent and business value of research findings. of hygienic polymers, which are ready to make a splash in the world market with quality, safety standard, and environmental friendliness attested by RoHS, FDA, and among other international standards. More than Baht 350 million is going into the establishment of an innovation and technology center to serve as a central for R&D on innovations and technology for the Company and its affiliates. Here, the R&D technology focus is on olefins, our core products, and derivatives that align with our Innovation and Technology Center business goals and operation. To be launched in 2008, our innovation center will house an R&D support unit, which consists of a polymer property test center, an analytical equipment unit, a product quality development and control unit, and a chemical formulation unit.

The Company is undertaking open innovation projects to form a nationwide and global R&D network through its cooperation with research institutes, universities, government agencies, and business allies in R&D

PTT CHEMICAL PUBLIC COMPANY LIMITED

025 25

VALUE-BASED ORGANIZATIONAL EFFECTIVENESS

VALUE-BASED ORGANIZATIONAL EFFECTIVENESS MODERN ORGANIZATIONAL MANAGEMENT SUPPORTING FUTURE GROWTH ROBUST ORGANIZATIONAL STRUCTURE LEADS TO STRINGENT DEVELOPMENT OF PEOPLE

Since our petrochemical and chemical business deals with assorted products, from upstream to downstream, a sound management system can be compared to a main artery for the continued growth of this enterprise. Our new organizational structure provides strength and readiness for growth, our focus on business performance and greater customer intimacy. This latter focus not only answers the needs of customers, but also provides an insight into their potential needs, market opportunities, and optimization of resources for our venturing into the world market. Our business direction for becoming an integrated chemicals industry leader has posed a real challenge for every unit in the Company, which means that they must proactively improve their performance to be better prepared to help the Company focus on the new business direction in a timely way. The Value-Based Organizational Effectiveness Project restructures the Company for greater efficiency and maximizes its value in line with the value chain. Today the three business groups, based by product value chain, rely on olefins production and public utilities as shared facilities or 26 026

2007 ANNUAL REPORT

Value-Based Organizational Effectiveness provides strength and readiness for growth, focus on business performance and greater customer intimacy.

the upstream unit to foster value and business performance. Both our shared facilities and our business groups operate under the support of a corporate center group, which serves in the governance role, and a shared-services role. Indeed, getting ready to sustain huge business management under a highly dynamic business and growth environment–with personnel so diverse in competence and expertise, as well as sizeable generational differences–calls for the strengthening and acceptance of change among the workforce. To compete in this business world, PTT Chemical must therefore manage this diversity while evolving sound processes and procedures under a harmonious business culture. Specifically, it must cultivate a tangible and knowledge-based organizational culture. Our knowledge management operation is being undertaken in parallel with the fostering of an atmosphere of a knowledge society while linking it to initiatives and development of innovations. Coordination among the three components has led to a cross-functional team called LINK (Learning Organization + Innovation + Knowledge Management), a key driving mechanism. And as a strategic partner, human resource management naturally plays a key role in laying down a strong and stable infrastructure.

PTT CHEMICAL PUBLIC COMPANY LIMITED LIMITED

HUMAN RESOURCE DEVELOPMENT

Since staff development for competency and familiarity with evolving technology is critical, PTT Chemical begins its people development as soon as they join the Company and keeps such development continually going, so as to evolve their core competencies and the knowledge and skills required for their jobs as well as providing activities and projects to enhance our staff in cooperation with external educational institutions. PTT Chemical’s employee welfare in line with the standard of the PTT Group, namely medical and dental care for employees and families, life assurance and accident insurance, provident fund contribution, social security, travel expenses, uniforms, employees’ children scholarships, and a savings cooperative. Related employees’ projects and activities include the following: • Good Health, Happy Life Project to keep employees fit and healthy • Hot Line mentoring service for a higher quality of life • 22 sports and recreational clubs through which the Company channels supporting budgets to foster unity among the workforce. These clubs have launched community outreach activities and activities with other companies. • Annual Family Day for employees and families to promote closeness among employees’ families while cultivating familiarity with the Company’s own culture • New Year’s Staff Party for employees’ traditional enjoyment.

027 27

ACHIEVEMENTS OF THE YEAR 2007

1 of 10 Outstanding Plants EIA Monitoring Award 2006 & 2007

Top Ten Premium

WITH ENERGY CONSERVATION

PRODUCTIONDELIVERY OF OLEFINS & HDPE PRODUCTS

Achievements of the Year 2007

PETROCHEMICALS PRODUCER IN ASIA (ROE), RANKED 7TH, Asiamoney magazine

ISO 9001:

Leading Listed

Outstanding OPERATOR IN SAFETY, OCCUPATIONAL HEALTH, AND WORK ENVIRONMENT AWARD FOR 2007

COMPANY OF 2007, RANKED 4TH, Finance & Banking magazine

028

2007 ANNUAL REPORT

SHAPING AN INNOVATIVE SOCIETY

PTT Chemical seeks partnership to nurture and develop a new corporate responsibility campaign called “Shaping an Innovative Society”. We have a strong determination to establish a potential network domestically and internationally, in order to sustain our business and create an innovative society for our country’s progress.

Shaping an Innovative Society In tandem with our petrochemical and chemical business leadership is our continued commitment to social and environmental responsibility. Through 2007, we undertook projects and activities-both new and ongoing-for society and communities.

SHARING KNOWLEDGE WITH SOCIETY

Our pilot projects in support of the research to develop and add value to local resources, through which we can disseminate knowledge to society at large; RESEARCH AND DEVELOPMENT PROJECT ON WASTEWATER TREATMENT TECHNIQUES IN LINE WITH THE ROYAL INITIATIVE

Based on the ‘Nature Heals Nature Processes’ concept and the recognition of natural knowledge and value, leading to improvement of actions and then expansion of such actions to society, we looked into wastewater treatment from chemical plants by water-based plants instead of relying on imported wastewater treatment technologies. Together with the Chaipattana Foundation’s Laem Phak Bia Environmental Research and Development Project under the Royal Initiative and the College of Environment, Kasetsart University, we launched a pilot project in our ethylene oxide and ethylene glycol plants in Rayong. The success here implies the new knowledge to be transferred by PTT Chemical to other companies for the benefit of communities, as well as providing a good learning ground for Ph.D. candidates. PTT CHEMICAL PUBLIC COMPANY LIMITED LIMITED

029 29

RESEARCH AND DEVELOPMENT PROJECT ON PRODUCTION OF ENERGY AND ALTERNATIVE CHEMICALS FROM JATROPHA:

This project supports community enterprises through PTT Chemical’s awarding of research fellowships to universities, so that their experts may conduct research and development, potentially leading to alternative solutions for farmers’ quality-of-life improvement. In support of community enterprises, PTT Chemical featured such actions through youths’ own experiences. awards research fellowships to universities, potential y In collaboration with Maxima Studio, the Company

leading to alternative solutions for farmers’ quality- has supported this documentary for the second year. of-life improvement. THAI HEARTS FOR THE ENVIRONMENT

Designed to alleviate global warming and ecological change while cultivating and stimulating common awareness for environmental stewardship. These projects are designed to alleviate global warming and ecological change while cultivating and stimulating common awareness for environmental stewardship;

FEASIBILITY STUDY ON MONKEY’S CHEEK AREA AROUND KHLONG TUP MA, RAYONG:

To promote water operation system management and water resource management in Rayong during normal and critical times, the Company in conjunction with the National Science and Technology Development Agency, Ministry of Science and Technology, launched

a feasibility study on modifications to this area.

UPGRADING EDUCATION, UPGRADING COMMUNITIES

PTT Chemical’s educational support and development activities aims to foster education at both the community level and the national level, so that Thai youths may become knowledgeable, visionary, experienced, and equipped with greater potential. Our key activities include the following: REMOTE EDUCATION THROUGH SATELLITES:

This royal initiative of His Majesty the King – beaming from Klai Kang Won School in Amphoe Hua Hin, Prachuap Khiri Khan, to Map Ta Phut schools – creates educational opportunities, improves the quality of education, and alleviates the shortage of teachers.

SPONSORSHIP OF ‘OUR FATHER’S BOOKS’ TV PROGRAM:

TRIPARTITE PROJECT TO IMPROVE EDUCATION:

SPONSORSHIP OF WINGED SANDBAGS:

With TV Channel 5, the Company disseminated This project supported the Chaipattana Foundation knowledge contained in the Thai Encyclopedia in line in its use of such sandbags, made of high-quality with His Majesty the King’s wishes. HDPE, in rehabilitating landslide-prone areas. “THAI HEARTS FOR THE ENVIRONMENT” TV DOCUMENTARY:

This documentary concerns those people committed to environmental stewardship and role models for communities. PTT Chemical aims to remind society of the significance of joint environmental conservation, particularly by youths. One portion of the documentary 030

Together with the Faculty of Education, Chulalongkorn University, and the Rayong Region 1 Educational Service Area Office, PTT Chemical sponsor instructor interns from Chulalongkorn University in Rayong schools to actively upgrade the standard of local education. 2007 ANNUAL REPORT

The Company will develop and maintain an occupational health, safety, and environment management system, and will provide sufficient resources for implementation.

THAILAND INNOVATION CONTEST PROJECT

This project involved petrochemical, polymer, and alternative fuels, allowed university students to showcase to the public and business operators their talents and research innovations or inventions with potential industrial or commercial applications, both domestic and international. Some of these may in time find business applications and have patents registered. POLICY ON OCCUPATIONAL HEALTH, SAFETY, AND ENVIRONMENT

2. Prevention and reduction of adverse impacts in

occupational health, safety, and environment to

all stakeholders. 3. Strict compliance to laws, regulations, and standard

requirements. 4. Continual improvement of operational systems

will be maintained. The Company will develop and maintain an occupational health, safety, and environment management system, and will provide sufficient resources for implementation. The Company will establish an implementation framework in accordance with the occupational health, safety, and enviroment management plan, and will thoroughly communicate to all stakeholders.

PTT Chemical Public Company Limited is committed to the management policies concerning occupational health, safety, and environment in all aspects of the Companyâ&#x20AC;&#x2122;s operations through: 1. Assessment of the risks in occupational health

and safety, and identify conditions likely to cause

environmental concerns. EIA AWARD Recognizing its significant task of environmental compliance with laws, regulations, and the policy to prevent and mitigate the risks of accidents and incidents, PTT Chemical takes the safety and occupational health of employees, communities, and stakeholders most seriously. In implementing the ISO 14001 environmental management system, it regularly applies measurement tools for water, air, and noise quality in its assessment while cultivating awareness in its personnel. Besides, PTT Chemicalâ&#x20AC;&#x2122;s environmental impact assessment report was so well prepared and its environmental aspects so well managed that in 2007 it won a national EIA Monitoring Award from the Ministry of Natural Resources and Environment. PTT CHEMICAL PUBLIC COMPANY LIMITED

031

PTTCHâ&#x20AC;&#x2122;S SUBSIDIARIES, AFFILIATES, AND REVENUE STRUCTURE

% of Shares

100%

Subsidiaries & Affiliates

Bangkok Polyethylene Public Company Limited (BPE)

Type of Business / Products

Manufacture - Sale of HDPE

Applications

Plastic Products

100%

TOC Glycol Company Limited Manufacture - Sale of EO/EG, MEG Polyester, Textile, PET Bottle (TOCGC)

100%

Thai Ethanolamines Company Limited Manufacture - Sale of (TEA) Ethanolamines

100%

Thai Choline Chloride Company Limited Manufacture - Sale of Animal Feed (TCC) Choline Chloride

PTT Polyethylene Company Limited (PTTPE)

50%

Thai Ethoxylate Company Limited (TEX)

Manufacture - Sale of Low Density Plastic Products Polyethylene - LDPE, Linear Low Density Polyethylene - LLDPE

Manufacture - Sale of Ethoxylates

100%

Thai Oleochemicals Company Limited Manufacture - Sale of (TOL) Methyl Ester, Fatty Alcohols, Glycerine

50%

Thai Fatty Alcohol Company Limited (TFA)

100%

Health & Personal Care Products

Health & Personal Care Products Home, Health & Personal Care Products, Bio-Diesel

Manufacture & Sale of Home, Health & Personal Care Oleochemical, Fatty Alcohols Products, Bio-Diesel and its derivatives

NPC Safety and Environmental Service Safety and Environment Services Company Limited (NPC S&E)

60%

NPTC Maintenance and Engineering Services Company Limited (NPTC)

Maintenance and Engineering Services

51%

Thai Tank Terminal Limited (TTT)

Jetty and Buffer Tank Farm Services

032

2007 ANNUAL REPORT

% of Shares

Subsidiaries & Affiliates

Type of Business / Products

Applications

40%

PTT Utility Company Limited (PTTUT)

Production - Sale of Utilities

30%

PTT Phenol Company Limited (PPCL)

Manufacture - Sale of Phenol

Polycarbonate, Epoxy Resin

25%

Vinythai Public Company Limited (VNT)

Manufacture - Sale of PVC

Plastic Products

25%

PTT Polymer Marketing Company Limited (PTTPM)

Marketing of Polymer Products for PTT Group

20%

PTT ICT Solutions Company Limited (PTTICT)

Provide Services for Information Communication and Technology to PTT Group of companies

REVENUE STRUCTURE OF THE COMPANY AND ITS SUBSIDIARIES Product / Service

Carried out by

Company 2005* Shareholding (MB) (%)

1. Sales of Olefins and By-Products • Sales of Ethylene PTTCH 100 PTTCH 100 • Sales of Propylene PTTCH 100 • Sales of By-Products PTTCH, BPE 100 2. Sales of HDPE TOCGC, TEX 100,50 3. Sales of EO/EG, EO Derivatives PTTCH 100 4. Sales of Utilities Total (1)-(4) TTT 51 5. Storage and Handling of Liquid Chemicals PTTCH 100 6. Related Services Income NPTC 60 7. Maintenance Services NPC S&E 100 8. Safety and Environmental Services Total

29,083 12,003 5,341 8,308 - 2,646 57,382 1,036 218 113 39 58,788

2006 (MB)

49 28,534 20 15,052 9 6,353 14 13,072 - 3,780 5 3,020 98 69,811 2 1,225 0 398 0 333 0 76 100 71,843

40 21 9 18 5 4 97 2 1 0 0 100

2007 (MB)

26,373 35 12,508 17 6,025 8 11,994 16 14,041 19 2,929 4 73,870 98 1,234 2 159 0 189 0 132 0 75,584 100

Note : • * The information is based on the PTT Chemical Public Company Limited and its subsidiaries companies pro forma financial statements, 31 December 2006, audited by Ernst & Young Office Limited. • MB : Million Baht PTT CHEMICAL PUBLIC COMPANY LIMITED

033

SHAREHOLDING STRUCTURE

List of major shareholders of PTT Chemical Public Company Limited Stock Symbol : PTTCH No.

Name

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

PTT Public Company Limited (PTT) The Siam Cement Public Company Limited (SCG) HMC Polymers Company Limited (HMC) Nortrust Nominees Ltd. (NORTRUST) OMAN Oil Company S.A.O.C (OMAN OIL) State Street Bank and Trust Company (SSB&T) Bangkok Synthetics Company Limited (BST) State Street Bank and Trust Company for Australia (SSB&TA) Thai NVDR Company Limited (THAINVDR) Government Pension Fund (GPF)

Number of Shares

% of Total Shares

737,917,272 303,058,127 42,132,567 27,281,929 25,962,453 22,712,152 21,928,254 13,492,249 11,648,860 10,824,009

49.33 20.26 2.82 1.82 1.74 1.52 1.47 0.90 0.78 0.72

As of November 30, 2007

SHAREHOLDING STRUCTURE

49.33 % 20.26 % 2.82 % 1.82 % 1.74 % 1.52 % 1.47 % 0.90 % 0.78 % 0.72 % 18.78 % 034

PTT SCG HMC NORTRUST OMAN OIL SSB&T BST SSB&TA THAINVDR GPF Other Shareholders 2007 ANNUAL REPORT

ORGANIZATION STRUCTURE

BOARD OF DIRECTORS

Audit Committee

Nominating Committee

Remuneration Committee

Corporate Governance Committee

PRESIDENT & CEO

Operational Service Subsidiaries

Internal Audit

Corporate Affairs

Olefins-Shared Facilities

Strategy & International Affairs

Marketing, Commercial & Supply Chain Governance

Polymer Products Value Center

PTT CHEMICAL PUBLIC COMPANY LIMITED

Finance and Accounting

Operational Excellence

EO-Based Performance Products Value Center

Organizational Effectiveness

Oleochemical Products Value Center

035

BOARD OF DIRECTORS

Mr. Pornchai Rujiprapa Chairman

Age : 55

Present Important Positions

• Permanent Secretary of Energy • Chairman, Electricity Generating Authority of Thailand • Chairman, PTT Aromatics and Refining Public Company Limited Education / Training

• • • • •

Ph.D. (Urban & Regional Economics) University of Pennsylvania, U.S.A. M.Sc. (Regional Economics) University of Pennsylvania, U.S.A. M.P.A (Programming Planning Administration) National Institute of Development Administration (NIDA) B.Sc. (Agro-Industry) Kasetsart University The Joint State – Private Sector Regular Course, Class 11, the National Defence College

Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class 56/2006, Thai Institute of Directors Association (IOD) Experiences

• Deputy Secretary General, the National Economic and Social Development Board (NESDB) • Deputy Permanent Secretary of Energy • Director, National Petrochemical Public Company Limited • Chairman, Electricity Generating Public Company Limited • Chairman, PTT Public Company Limited • Chairman, Rayong Refinery Public Company Limited Relation among family within the Company None

036

2007 ANNUAL REPORT

Mr. Prasert Bunsumpun Vice Chairman

Age : 55

Present Important Positions

• • • • •

Chief Executive Officer & President, PTT Public Company Limited Director, PTT Exploration and Production Public Company Limited Director, Thai Oil Public Company Limited Vice Chairman, IRPC Public Company Limited Director, PTT Aromatics and Refining Public Company Limited

Education / Training

• Honorary Doctorate Degree in Engineering, Chulalongkorn University • M.B.A., Utah State University, U.S.A. • Bachelor of Civil Engineering, Chulalongkorn University • Certificate in Advanced Management Program, Harvard Business School, U.S.A. • The Joint State – Private Sector Regular Course, the National Defense College (Class 10) • Politics and Governance in Development Systems for Executive Course, King Prajadhipok’s Institute (Class 6) Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class 26/2004, Thai Institute of Directors Association (IOD) Experiences

• Senior Executive Vice President, Gas Business Group, PTT Public Company Limited • Vice Chairman, National Petrochemical Public Company Limited • Vice Chairman, Thai Olefins Public Company Limited • Director, The Aromatics (Thailand) Public Company Limited • Director, Rayong Refinery Public Company Limited Relation among family within the Company None PTT CHEMICAL PUBLIC COMPANY LIMITED

Mr. Olarn Chaipravat Independent Director Chairman of the Audit Committee Director to the Nomination Committee

Age : 63

Present Important Positions

• Director and Chairman of Audit Committee, PTT Public Company Limited • Director, Chiangmai Frozen Foods Public Company Limited • Chairman, the TSFC Securities Limited • Chairman, Thai Asset Management Corporation • Chairman, the Office for National Education Standards and Quality Assessment (Public Organization) • Honorable Advisor to Fiscal Policy Research Institute • Council Member, Shinawatra University Education / Training

• Ph.D. Economics, Massachusetts Institute of Technology, (M.I.T.), U.S.A. • B.S. (Magna Cum Laude), Economics, Wharton School, University of Pennsylvania, U.S.A. Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class 4/2003, Thai Institute of Directors Association (IOD) Experiences

• President and Chief Executive Director, the Siam Commercial Bank Public Company Limited • Independent Director and Audit Committee, Thai Olefins Public Company Limited • Director, Thai Oil Public Company Limited Relation among family within the Company None

037

Mr. Manu Leopairote Independent Director Chairman of the Corporate Governance Committee Director to the Audit Committee Age : 64

Present Important Positions

• Chairman, Thaioil Power Company Limited • Director, Thai Oil Public Company Limited Education / Training

• • • •

M.Sc. Economics, University of Kentucky, U.S.A. B.Sc. Economics (Honor) Thammasat University Certificate, Industrial Development, Nagoya, Japan The National Defence College, Class 34

Training on Director Roles and Responsibilities

• The Role of the Chairman Program, Class 3/2001 and Director Certificate Program (DCP), Class 30/2003, Thai Institute of Directors Association (IOD) Experiences

• Permanent Secretary, Ministry of Industry • Chairman, PTT Public Company Limited • Chairman, PTT Exploration and Production Public Company Limited • Chairman, National Petrochemical Public Company Limited • Chairman, Thai Olefins Public Company Limited Relation among family within the Company None

038

Mr. Pala Sookawesh Director Chairman of the Remuneration Committee Chairman of the Nomination Committee Age : 67

Present Important Positions

• Chairman, Bangkok Polyethylene Public Company Limited • Director, PTT Exploration and Production Public Company Limited • Director, PTT Aromatics and Refining Public Company Limited • Director, Thai Oil Public Company Limited • Director, IRPC Public Company Limited • Chairman, Thai Oleochemicals Company Limited Education / Training

• Honorary Doctorate Degree in Engineering from Chulalongkorn University • M.S. Industrial Engineering (Operation Research), Oregon State University • Bachelor of Engineering (Honors) in Electrical Engineering (Power), Chulalongkorn University • Cert. in System Analysis in Water Resource Planning, U.S. Army. Corps. of Engineers, U.S.A. • Diploma, National Defence Course for the Joint State – Private Sector, The National Defense College (Class 333) • Cert. in Advanced Management Program, Harvard Business School, Harvard University, U.S.A. Training on Director Roles and Responsibilities

•

The Role of the Chairman Program, Class 2/2001, Director Accreditation Program (DAP), Class 14/2004, and The Role of the Compensation Committee (RCC), Class 3/2007, Thai Institute of Directors Association (IOD)

Experiences

• Director, PTT Public Company Limited • Director and Chairman of Audit Committee, Vinythai Public Company Limited • Chairman, The Aromatics (Thailand) Public Company Limited Relation among family within the Company None

2007 ANNUAL REPORT

Mr. Cherdpong Siriwit Director Age : 61

Present Important Positions

• Chairman, PTT Exploration and Production Public Company Limited • Chairman, Thai Oil Public Company Limited • Director, Thaioil Power Company Limited Education / Training

• M.A. Economics, Georgetown University, U.S.A. • B.A. Economics (Honor), Thammasat University • The National Defence College, Class 40 • King Prajadhipok’s Institute “Politics and Governance in Democratic Systems for Executives”, Class 5 • The Civil Service Executive Development Program I (Class 13), the Civil Service Training Institute Training on Director Roles and Responsibilities

•

Director Accreditation Program (DAP) Class 8/2004, The Role of the Chairman Program Class 10/2004, and Finance for Non-Finance Director Class 13/2004, Thai Institute of Directors Association (IOD)

Experiences

• • • •

Permanent Secretary, Ministry of Energy Chairman, PTT Public Company Limited Chairman, the Electricity Generation Authority of Thailand Chairman, National Petrochemical Public Company Limited Relation among family within the Company None PTT CHEMICAL PUBLIC COMPANY LIMITED

Mr. Tongchat Hongladaromp Director

Age : 69

Present Important Positions

• Director, PTT Exploration and Production Public Company Limited • Director, Bangkok Polyethylene Public Company Limited • Director, Vinythai Public Company Limited • Chairman, Thai Fatty Alcohol Company Limited • Chairman of the Board of Directors, TMB Asset Management Company Limited • President of the University Council, King Mongkut’s University of Technology Thonburi • Council of Trustees, Petroleum Institute of Thailand Education / Training

• • • •

Ph.D. Civil Engineering, Northwestern University, Illinois, U.S.A. Master of Civil Engineering, Asian Institute of Technology Bachelor of Civil Engineering (Honor), Chulalongkorn University The National Defence College

Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class 36/2005 and Finance for Non-Finance Director Program, Class 24/2005, Thai Institute of Directors Association (IOD) Experiences

• • •

Advisor to the Energy Minister, Ministry of Energy Chairman, Executive Board of Directors, Industrial Estate Authority of Thailand Independent Director, Chairman of the Audit Committee, Director to the Nominating and Remuneration Committee, Thai Olefins Public Company Limited Relation among family within the Company None

039

Lt. Gen. Sujin Muakkaew Independent Director Age : 60

Education / Training

• • • •

Royal Thai Army Command and General Staff College M.Sc. (M.E.) University of Colorado, Boulder, Colorado, U.S.A. Chulachomklao Royal Military Academy (B.Sc.) The National Defence College – Services, Private, Politics Sector Class 1

Training on Director Roles and Responsibilities

•

Director Accreditation Program (DAP), Class 62/2007, Director Certification Program (DCP), Class 88/2007, Understanding the Fundamental of Financial Statements, Class 9/2007, and Finance for Non-Finance Director Program, Class 35/2007, Thai Institute of Directors Association (IOD)

Experiences

• • • •

Military Expert Advisor to the Royal Thai Army Deputy Army Comptroller, Office of the Royal Thai Army Comptroller Vice Superintendent, Chulachomklao Royal Military Academy Relation among family within the Company None

040

Mr. Paibulya Punyavutti Independent Director Director to the Audit Committee Director to the Remuneration Committee Age : 65

Present Important Positions

• Chairman, Wang Tong Group Public Company Limited • Director, Thai Industrial Gas Public Company Limited • Chairman, Atop Technology Company Limited Education / Training

• B.Sc. Chemical Engineering, Chulalongkorn University • Senior Executive Program, National Institute of Development Administration (NIDA) • Senior Executive Program, Sasin Graduate Institute of Business Administration of Chulalongkorn University (Sasin) • NPRA International Petrochemical Conference, U.S.A. • Balanced Scorecard by Learnet International (Thailand) Co., Ltd. Training on Director Roles and Responsibilities

• Director Certification Program (DCP), Class 22/2002, and Setting the CEO Performance Plan and Evaluation, Thai Institute of Directors Association (IOD) Experiences

• Senior Executive Vice President, PTT Public Company Limited • President, The Aromatics (Thailand) Public Company Limited • Advisor to Board of Directors of The Aromatics (Thailand) Public Company Limited • Chairman, Rayong Petrochemical Corporation Limited Relation among family within the Company None 2007 ANNUAL REPORT

Mr. Pichai Chunhavajira Director Director to the Remuneration Committee Director to the Corporate Governance Committee Age : 58

Present Important Positions

• Chief Financial Officer, PTT Public Company Limited • Director, PTT Exploration and Production Public Company Limited • Director, PTT Aromatics and Refining Public Company Limited • Director, Thai Oil Public Company Limited • Director, Bangchak Petroleum Public Company Limited • Vice Chairman, Dhipaya Insurance Public Company Limited Education / Training

• • • •

Honorary Degree Doctor of Philosophy (Accounting) M.B.A. (Finance), Indiana University of Pennsylvania, U.S.A. Bachelor of Accounting, Thammasat University The Joint State – Private Sector Regular Course, The National Defence College, Class 13

Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class 49/2005, Thai Institute of Directors Association Association (IOD) Experiences

• Director, EGAT Public Company Limited • Director, the Metropolitan Electricity Authority • Director and Director to the Nominating and Remuneration Committee, Thai Olefins Public Company Limited • Director, The Aromatics (Thailand) Public Company Limited Relation among family within the Company None PTT CHEMICAL PUBLIC COMPANY LIMITED

Mr. Prajya Phinyawat Director Director to the Nomination Committee Director to the Corporate Governance Committee Age : 56

Present Important Positions

• Chief Operation Officer, Downstream Petroleum Business Group, PTT Public Company Limited • Director, PTT Aromatics and Refining Public Company Limtied • Director, Thai Oil Public Company Limited • Director, IRPC Public Company Limited Education / Training

• • • •

Ph.D. (Civil Eng.), University of Texas at Austin, U.S.A. M.S. (Civil Eng.), Stanford University, U.S.A. B.E. (Civil Eng.), Chulalongkorn University The National Defense College, Class 15

Training on Director Roles and Responsibilities

• Directors Certification Program (DCP), Class 14/2002, Thai Institute of Directors Association (IOD) Experiences

• Senior Executive Vice President, Corporate Strategy and Development, PTT Public Company Limited • Senior Executive Vice President, Corporate Support, PTT Public Company Limited • Director and Member of the Remuneration Committee, National Petrochemical Public Company Limited • Director, Thai Olefins Public Company Limited • Director, The Aromatics (Thailand) Public Company Limited • Director, Rayong Refinery Public Company Limited Relation among family within the Company None

041

Mr. Cholanat Yanaranop Director Age : 48

Mr. Roongrote Rangsiyopash Director Age : 44

Present Important Positions

Education / Training

• Director, Thai Plastic and Chemicals Public Company Limited • President, SCG Chemicals Company Limited • Chairman, Rayong Olefins Company Limited • Chairman, SCG Polyolefins Company Limited • Chairman, Thai Polyethylene Company Limited • Chairman, Thai Polypropylene Company Limited • Chairman, SCG Plastics Company Limited • Chairman, Map Ta Phut Olefins Company Limited • Council of Trustees, Petroleum Institute of Thailand • • •

Master of Chemical Engineering, Imperial College, London, U.K. Bachelor of Environmental Chemical Engineering, Salford University, Manchester, U.K. Certificate in Advanced Management Program, Harvard Business School, U.S.A.

Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class 39/2005, Thai Institute of Directors Association (IOD) Experiences

• Executive Vice President, Cementhai Chemicals Company Limited • Director, Thai Olefins Public Company Limited Relation among family within the Company None

042

• Vice President and Chief Financial Officer, SCG • Director, Rayong Olefins Company Limited • Director, SCG Polyolefins Company Limited • Director, Thai Polyethylene Company Limited • Director, Thai Polypropylene Company Limited • Director, SCG Plastics Company Limited • Director, SCG Chemicals Company Limited • Director, Map Ta Phut Olefins Company Limited • Director, Siam Styrene Monomer Company Limited • • •

M.B.A. (with Distinction), Harvard Business School, Harvard University, U.S.A. M.S. Industrial Engineering, University of Texas (Arlington), U.S.A. Bachelor of Engineering, Chulalongkorn University

Training on Director Roles and Responsibilities

• Director Accreditation Program (DAP), Class Cementhai, Thai Institute of Directors Association (IOD) Experiences

• Corporate Planning Director, the Siam Cement Public Company Limited • Director, Pacific Plastics (Thailand) Limited Relation among family within the Company None 2007 ANNUAL REPORT

Mr. Pichit Nithivasin Director Age : 61

Present Important Positions

• Director, Thoresen Thai Agencies Public Company Limited • Chairman, Bangkok Industrial Gas Company Limited • Director, HMC Polymers Company Limited • Director, Rayong Olefins Company Limited • President, Bangkok Synthetics Company Limited • President, BST Elastomers Company Limited Education / Training

• • • •

Ph.D. Operation Research, University of California, Berkeley, U.S.A. M.S. Industrial Engineer / Operation Research, University of California, Berkeley, U.S.A. M.S. Electrical Engineer and Computer Science, University of California, Berkeley, U.S.A. B.S. Industrial Engineer, University of California, Berkeley, U.S.A.

Mr. Aditheb Bisalbutr Director Secretary to the Board of Directors Present Important Positions

• President & CEO, PTT Chemical Public Company Limited • Senior Executive Vice President, PTT Public Company Limited • Director, Vinythai Public Company Limited • Chairman, TOC Glycol Company Limited • Chairman, Thai Ethanolamines Company Limited • Director, Thai Oleochemicals Company Limited • Director, Thai Tank Terminal Limited • Council of Trustees, Petroleum Institute of Thailand Education / Training

• Master of Electrical Engineering, University of Houston, Texas, U.S.A. • Bachelor of Electrical Engineering, Chulalongkorn University • Certificate of Modern Marketing, Chulalongkorn University

Training on Director Roles and Responsibilities

Experiences

• Finance for Non-Finance Director Program, Class 4/2003, Thai Institute of Directors Association (IOD) • • • •

Vice Chairman, Bangkok Polyethylene Public Company Limited Vice Chairman, National Petrochemical Public Company Limited Director, Thai Olefins Public Company Limited Managing Director, Map Ta Phut Industrial Gases Company Limited Relation among family within the Company None

PTT CHEMICAL PUBLIC COMPANY LIMITED

Age : 59

• Director Certification Program (DCP), Class 48/2004, Thai Institute of Directors Association (IOD) • President & CEO and Secretary to the Board of Directors, Thai Olefins Public Company Limited Relation among family within the Company None

043

MANAGEMENT TEAM

Mr. Aditheb Bisalbutr President & CEO Age : 59 Present Important Positions

• • • • • • •

Senior Executive Vice President, PTT Public Company Limited Director, Vinythai Public Company Limited Chairman, TOC Glycol Company Limited Chairman, Thai Ethanolamines Company Limited Director, Thai Oleochemicals Company Limited Director, Thai Tank Terminal Limited Council of Trustees, Petroleum Institute of Thailand

Education / Training

• • • •

Master of Electrical Engineering, University of Houston, Texas, U.S.A. Bachelor of Electrical Engineering, Chulalongkorn University Certificate of Modern Marketing, Chulalongkorn University Directors Certification Program (DCP), Class 48/2004, Thai Institute of Directors Association (IOD)

Experiences

• President & CEO, Thai Olefins Public Company Limited Relation among family within the Company

044

None

2007 ANNUAL REPORT

Mr. Sahaschai Panichapong Senior Executive Vice President, Oleochemical Products Value Center Age : 60

Present Important Positions

• • • • • •

Director, Thai Tank Terminal Limited Director, Vinythai Public Company Limited Director, PTT Utility Company Limited Director, Thai Oleochemicals Company Limited Director, PTT Phenol Company Limited Director, NPC Safety & Environmental Service Company Limited

Education / Training

• • •

Master of Engineering (Mechanical), Lamar University, Beaumont, Texas, U.S.A. Bachelor of Engineering (Mechanical), Chulalongkorn University Director Accreditation Program (DAP), Class 56/2006, Thai Institute of Directors Association (IOD)

Experiences

• • • •

Senior Executive Vice President – Operations, PTT Chemical Public Company Limited Acting President, TOC Glycol Company Limited Director, TOC Glycol Company Limited EVP – Chief Production Officer, Thai Olefins Public Company Limited Relation among family within the Company None

PTT CHEMICAL PUBLIC COMPANY LIMITED

Ms. Panada Kanokwat Senior Executive Vice President, Finance & Accounting Age : 59

Present Important Positions

• • • • • •

Director, TOC Glycol Company Limited Director, Thai Choline Chloride Company Limited Director, Thai Ethanolamines Company Limited Director, Bangkok Polyethylene Public Company Limited Director, PTT Polyethylene Company Limited Executive Vice President, Senior Executive Vice President – Petrochemical Business & Refinery Group, PTT Public Company Limited

Education / Training

• • • • •

M.B.A. (Business Administration – Finance & Banking) North Texas State University, U.S.A. Bachelor of Accounting, Faculty of Commerce & Accountancy, Thammasat University Executives Certificate, Capital Market Academy Leadership Program, Capital Market Academy Certificate Executive Program in International Management Stanford – National University of Singapore Certificate in Building, Leading & Sustaining the Innovative Organization – Sloan School of Management, Massachusetts Institute of Technology, U.S.A.

Mr. Khubbhol Suksupha Senior Executive Vice President Appointed as Executive Vice President of PTT Public Company Limited Age : 57

Present Important Positions

• •

Managing Director, PTT Polyethylene Company Limited Director, PTT Polymer Logistic Company Limited

Education / Training

• • •

M.Eng. (Industrial Development and Management), Asian Institute of Technology (AIT) B.Eng. (Mechanical Engineering), Chulalongkorn University Cert. in Advanced Management Program, Harvard Business School, Harvard University, U.S.A.

Experiences

• •

Senior Executive Vice President (Business), National Petrochemical Public Company Limited Senior Executive Vice President (Business and Administration), National Petrochemical Public Company Limited Relation among family within the Company None

Experiences

• • •

Director, SPRC Company Limited Director, RRC Public Company Limited Executive Vice President – Corporate Finance, PTT Public Company Limited Relation among family within the Company None

045

Mr. Jiamsak Nantananate Executive Vice President, Operational Excellence Age : 56

Mrs. Puntip Oungpasuk Executive Vice President, Strategy & International Affairs Age : 48

Mr. Athavudhi Hirunburana Executive Vice President, Organizational Effectiveness Age : 51

Present Important Positions

• • •

• • • • • • •

Chairman, NPC Safety & Environmental Service Company Limited Director, NPTC Maintenance and Engineering Services Company Limited Director, Thai Choline Chloride Company Limited

Education / Training

• • •

Master’s Degree in Mechanical Engineering, Chulalongkorn University Bachelor’s Degree in Mechanical Engineering, Chulalongkorn University Director Certification Program (DCP), Class 92/2007, Thai Institute of Directors Association (IOD)

Experiences

• •

Executive Vice President – Chief Engineering & Construction, PTT Chemical Public Company Limited Senior Vice President, Chief Engineering & Project Management, Thai Olefins Public Company Limited Relation among family within the Company None

Director, TOC Glycol Company Limited Director, Thai Oleochemicals Company Limited Director, Vinythai Public Company Limited Director, PTT Polymer Marketing Company Limited Director, PTT Polyethylene Company Limited Director, PTT Phenol Company Limited Director, Thai Tank Terminal Limited

Education / Training

• Master’s Degree in Business Administration (Commerce & Accountancy), Thammasat University • Bachelor’s Degree in Chemical Engineering, Prince of Songkla University • Director Certification Program (DCP) Class 67/2005, Thai Institute of Directors Association (IOD) and Australian Institute of Company Directors • Completion Chief Finance Officer (CFO) Class 1/2004, The Institute of Certified Accountants and Auditors of Thailand • The Advance Management Program (AMP), Harvard Business School, U.S.A.

• • • • •

• •

Executive Vice President - Corporate Strategy & Business Development, PTT Chemical Public Company Limited Senior Vice President and Chief Corporate Finance & Strategy, Thai Olefins Public Company Limited Relation among family within the Company None

046

Director, NPTC Maintenance and Engineering Services Company Limited Director, TOC Glycol Company Limited Director, Thai Choline Chloride Company Limited Director, Thai Ethanolamines Company Limited Director, Eastern Fluid Transport Company Limited Director, PTT Utility Company Limited Director, PTT ICT Solutions Company Limited

Education / Training

Experiences

Master of Science (Mechanical), Manhattan College, New York, U.S.A. Bachelor of Science (Mechanical), New York Institute of Technology, U.S.A. Director Accreditation Program (DAP), Class 81/2006, Thai Institute of Directors Association (IOD) Senior Executive Program 2007, Stanford University, U.S.A. Senior Executive Program, Sasin Graduate Institute of Business Administration of Chulalongkorn University

Experiences

• Executive Vice President – Chief Corporate Development & Support, PTT Chemical Public Company Limited • Acting Managing Director, Thai Ethoxylate Company Limited • Vice President – Administration & Procurement, Thai Olefins Public Company Limited Relation among family within the Company None

2007 ANNUAL REPORT

Mr. Dhanes Charoensupaya Executive Vice President, Marketing, Commercial & Supply Chain Governance Age : 53

Mr. Narong Bunditkamol Executive Vice President, Olefins – Shared Facilities

Present Important Positions

• • • •

Director, PTT Utility Company Limited Director, PTT Phenol Company Limited Director, Alliance Petrochemical Investment (Singapore) Pte., Limited Director, MEHR Petrochemical company (Private Joint Stock) (MHPC)

Education / Training

• • • • •

Ph.D. (Mechanical Engineering), Illinois Institute of Technology, U.S.A. Master of Science (Mechanical Engineering), Texas A&I University, U.S.A. Bachelor’s Degree in Mechanical Engineering, Chulalongkorn University Cert. in Advance Management Program, Harvard Business School, U.S.A Director Certification Program (DCP), Class 97/2007, Thai Institute of Directors Association (IOD)

Experiences

• • •

Senior Vice President, PTT Chemical Public Company Limited Executive Vice President – Operation, TOC Glycol Company Limited EO/EG Project Director, PTT Chemical Public Company Limited

Relation among family within the Company

None

PTT CHEMICAL PUBLIC COMPANY LIMITED

Age : 53

Mr. Veerasak Kositpaisal Executive Vice President, Polymer Products Value Center

Present Important Positions

• • •

• • • • • •

Director, Thai Tank Terminal Limited Director, PTT Utility Company Limited Director, NPC Safety and Environmental Service Company Limited

Education / Training

• • • • •

M.B.A., Thammasat University B.Eng. (Electrical Engineering), Chulalongkorn University Director Certification Program (DCP), Class 97/2007, Thai Institute of Directors Association (IOD) Senior Executive Program, Sasin Graduate Institute of Business Administration of Chulalongkorn University Cert. in Advanced Management Program, Harvard Business School, Harvard University, U.S.A.

Experiences

• •

Executive Vice President (Operation), National Petrochemical Public Company Limited Executive Vice President, National Petrochemical Public Company Limited (Secondment to PTT Polyethylene Company Limited) Relation among family within the Company None

Age : 53

Executive Vice President, PTT Public Company Limited Director, Secretary of the Board of Directors and Managing Director, Bangkok Polyethylene Public Company Limited Director, NPC Safety & Environmental Service Company Limited Director, PTT Polymer Marketing Company Limited Director, PTT Polyethylene Company Limited Director, PTT Polymer Logistics Company Limited

Education / Training

• • •

Master of Science (Mechanical Engineering), Texas A&I University, U.S.A. Bachelor of Engineering (Mechanical), Chulalongkorn University Director Certification Program (DCP), Class 82/2006 and Finance for Non-Finance (FN), Class 30/2006, Thai Institute of Directors Association(IOD)

Experiences

• Executive Vice President - Marketing & Commercial, PTT Chemical Public Company Limited • Director and Public Affairs Manager, Esso Thailand and ExxonMobil Thailand • Lubes Country Manager, Esso Thailand and ExxonMobil Thailand Relation among family within the Company None

047

Mr. Suvit Tinnachote Executive Vice President, EO-Based Performance Products Value Center

Mrs. Thasnalak Santikul Senior Vice President, Corporate Affairs

Age : 51 Present Important Positions

• • • •

Chairman, Thai Choline Chloride Company Limited Director, TOC Glycol Company Limited Director, Thai Ethanolamines Company Limited Director, NPC Safety and Environmental Service Company Limited

Education / Training

• • • •

Master of Public and Private Management, National Institute of Development Administration (NIDA) Bachelor’s Degree in Electrical Engineering, King Mongkut’s Institute of Technology (Ladkrabang) Director Certification Program (DCP), Class 92/2007, Thai Institute of Directors Association (IOD) Asean Executive Program (AEP), GE Crotinvil e

Experiences

• • •

Executive Vice President – Chief Operating Unit Plant I-4, PTT Chemical Public Company Limited Senior Vice President, Operations, Thai Olefins Public Company Limited Expansion Project Director, Thai Olefins Public Company Limited

Relation among family within the Company

048

Age : 53

Mr. Kongkrapan Intarajang Senior Vice President, Oleochemical Products Value Center Age : 40

Education / Training

Present Important Positions

• • •

• • • •

Master and Doctorate Degree (D.E.S) International Laws, Universite D’AixMarseille, France Bachelor Degree in Political Science (International Affairs), Thammasat University Director Certification Program (DCP), Class 92/2007, Thai Institute of Directors Association (IOD)

Acting Vice President - Business Development, PTT Chemical Public Company Limited President & Board of Director, Thai Oleochemicals Company Limited Board of Director, Thai Fatty Alcohol Company Limited Board of Director, Thai Ethoxylate Company Limited

Experiences

Education / Training

• • •

• Ph.D. in Chemical Engineering from the University of Houston, Texas, U.S.A. • Bachelor of Engineering (2nd Class Horns), Chulalongkorn University • Annual Meeting 2007/ The European Petrochemical Association–Germany • Asia Petrochemical Industry Conference 2007/ APIC–Taiwan • 2007 International Petrochemical and Refiners Association/ NPRA–U.S.A. • 2007 World Petrochemical Conference & Industry Workshops/ CMAI–U.S.A. • Annual Palm & Lauric Oils Conference & Exhibition Price Outlook 2007/ 2008- Malaysia

Senior Vice President – Office of the President, PTT Chemical Public Company Limited Vice President Corporate Governance Office, PTT Chemical Public Company Limited Vice President – Office of the President, Thai Olefins Public Company Limited Relation among family within the Company None

Experiences

None

• • •

Vice President - Business Development, PTT Chemical Public Company Limited Acting President & Board of Director, Thai Oleochemicals Company Limited Vice President-Corporate Strategy & Project Development, Thai Olefins Public Company Limited Relation among family within the Company None

2007 ANNUAL REPORT

Mr. Tawatchai Chittavanich Senior Vice President, Appointed as Managing Director of Thai Tank Terminal Limited Age : 56 Education / Training

• •

M.S. (Systems Engineering), West Coast University, U.S.A. B.Eng. (Mechanical Engineering), Chulalongkorn University

Experiences

•

Executive Vice President, National Petrochemical Public Company Limited, appointed as Managing Director of Thai Tank Terminal Limited Relation among family within the Company None

PTT CHEMICAL PUBLIC COMPANY LIMITED

Mr. Ampol Kulnawin Senior Vice President Age : 54

Mr. Prakob Petcharuttana Senior Vice President

Age : 51

Education / Training

• B.Eng. (Mechanical Engineering), Chulalongkorn University

• M.B.A., National Institute of Development Administration (NIDA)

Experiences

• •

Executive Vice President, National Petrochemical Public Company Limited, appointed as Managing Director of NPTC Maintenance & Engineering Services Company Limited Managing Director, NPTC Maintenance & Engineering Services Company Limited Relation among family within the Company None

Executive Vice President, National Petrochemical Public Company Limited, appointed as Managing Director of NPC Safety and Environmental Service Company Limited Managing Director, NPC Safety and Environmental Service Company Limited

Relation among family within the Company

None

049

MANAGEMENT STRUCTURE

The Company’s management structure consists of a Board of Directors (‘Board’), sub-committees (usually referred to as ‘committees’), the President, and the management: BOARD OF DIRECTORS 1. Composition

According to Company regulations, the Board consists of five and up to 15 members (directors), of whom no less than three are independent directors, elected and removed by the shareholders. At least half of the directors must reside in Thailand. All directors, who must be qualified by law, must not be over 70 years old.

2. Appointment and Retirement of Directors

Company regulations on the appointment, removal, or retirement of directors are summarized below: Appointment • The shareholders elect directors under the following rules: (1) Each shareholder has one vote per share. (2) If the number of nominees is not more than that of directors required in an election, the

shareholders’ meeting simply elects those nominees. Each shareholder exercises all votes

applicable under (1) to elect one or more directors. A shareholder cannot allocate only part of

his/her votes to any nominee. (3) If the number of nominees is greater than that of directors required in the election, a shareholder

is to cast his/her vote for the nominees individually. In voting, the nominees are to receive the

numbers of votes according to the number of shares each shareholder holds as under (1). Each

shareholder cannot allocate only part of his/her votes to any nominee. The nominees are to be

ranked by the total numbers of votes received and those that gather the most votes are elected

as directors, but the numbers can only be equal to that of the directors required. If the nominees

receive equal votes such that their election would result in more directors than required, the

chairman of the meeting is to cast a vote to decide which one(s) is appointed. • The directors are to appoint any one among themselves as Chairman, who is to make a final decision

anytime there are an equal number of votes among the directors. The Board is to appoint another

director as Vice Chairman, who by Company regulations acts as assigned by the Chairman or on his/her

behalf in case he/she is unable to perform the duty, or if the Chairman’s position becomes vacant.

The Board is to also appoint another director as the director and secretary to the Board, called the President. • If vacancies on the Board exist for reasons other than term expiration, the Board is to select a

qualified person with no illicit quality for consideration in the following Board meeting. Except the

remaining term of directorship is less than two months. The newly elected director replacing the

former is to stay in office for the remaining term of the former. The resolution of the Board on this

matter must consist of no less than three-quarter votes of the remaining directors. • If vacancies on the Board are less than the quorum, the current Board is to only call, on behalf of the

Board, for a shareholders’ meeting to elect directors to fill the vacancies, to be held within one month.

Each newly elected director replacing the former is to stay in office for the remaining term of the former. 050

2007 ANNUAL REPORT

Termination of directors • In every Annual General Meeting (AGM), one-third of the directors - or if the number is not a multiple

of three, then the number nearest to one-third – is to retire from office. The names of those to retire

during the first and the second year after the Company was registered are to be drawn by lots. For

subsequent years, those with the longest terms are to retire. Nevertheless, a director whose term in

the office expires may be re-elected. • Apart from term expiration, directorship is to be considered terminated for reasons of death, resignation,

disqualification, shareholders’ resolutions to remove a director, or a court order to remove a director. • Any director may resign by submitting a resignation letter to the Company, and such resignation will

take effect on the date the Company receives the letter. He/she may also inform the registrar about

the resignation. • In a shareholders’ meeting, shareholders may vote for the removal of any director from office before

his/her term expires, in which case a three-quarter vote of eligible shareholders present at the

meeting is required, provided that the number of shares represented by the three-quarter vote is no

less than half of the total number of shares represented by the total number of eligible shareholders

present at the meeting.

3. Authority and Duties of the Board of Directors

The Board’s core responsibility is to manage Company business and perform its duties under relevant laws, objectives, and regulations of the Company, in addition to the resolutions of the shareholders’ meeting. The authority, duties, and responsibilities of the Board are as follows: Duties required by law • Ensure correct and complete financial statements, especially: (1) The amount of all income and expenses and the Company’s profits and losses (2) The Company’s assets and liabilities (3) Shareholders’ equity and reserve fund. • Appoint the external auditor to examine financial statements and present for approval to shareholders

in the AGM within four months from the end of the Company’s accounting periods. The Board is to

send copies of the audited financial statements together with the auditor’s report and the annual

report to all shareholders at least seven days ahead of each meeting date. • Identify the authorized directors who will sign on the behalf of the Company with Company Seal affixed. • Consider interim dividend payment when the Company makes enough profits and report to shareholders in the next shareholders’ meeting. Oversight of the Company • Direct and monitor the management’s operation to ensure performance efficiency. • Decide the Company’s internal regulations. • Consider the Company’s annual budget, containing operating and investment budgets. • Assign one director or more to act on behalf of the Board. • Appoint other person(s) to carry out Company business under the Board’s control or delegate

authority to the mentioned person(s) and within a suitable timeframe. The Board may revoke, repeal,

or amend the authorization at any time. • Hold Board of Directors’ meetings; organize shareholders’ meetings and notify all shareholders;

ensure preparation of minutes of Board meetings and shareholders’ meetings. • Establish the Company’s structures. PTT CHEMICAL PUBLIC COMPANY LIMITED

051

• Consider giving permission to directors wishing to buy the Company’s assets or sell his/hers to the

Company or conduct any transactions with it, either on his/her behalf or others’. • Offer opinions on various matters proposed to shareholders’ meetings, including opinions for the

approval of the allocation of annual net profits for capital reserves. • Appoint the Audit Committee, the Nominating Committee, the Remuneration Committee, and the

Corporate Governance Committee. Each committee is to consist of three directors from the Company

and one independent director, except the Audit Committee, whose members must be independent directors.

The following matters, however, require prior approval by the shareholders’ meeting: • Engagement in a connected transaction as defined by the notification of SET for connected transactions

of listed companies • Acquisition or sale of significant assets as defined by the notification of SET for connected transactions

of listed companies • Sale or transfer of the whole or essential parts of the Company to other entities • Purchase or takeover of other companies • Preparation, amendment, or termination of contracts dealing with the granting of a lease of the whole

or essential parts of any Company business, the assignment to any other person to manage the

Company, or the merger of the Company with any other entity to share profits and losses • Amendment of the Memorandum of Association or Company regulations • Increase/reduction in registered capital • Issuance of debentures for the public • Company dissolution/merger • Announcement of yearly dividend payment • Other businesses as defined by Company regulations that require prior approval at a shareholders’

meeting.

4. Authorized Directors

By Company regulations, ‘authorized directors’ means two directors’ signatures together with Company Seal affixed.

5. Authority and Responsibilities of the President

The President is to conduct the Company’s day-to-day business as well as other businesses under Board resolution at its meeting no. 1/2005 of 7 December 2005, and to perform core responsibilities under Company announcement no. 108/2007 of 1 December 2007, including the authority to manage Company tasks under Board policy, as summarized below: • Be accountable to the Board and shareholders by generating and creating business value for stakeholders • Devise objectives for the supervision of the PTT Chemical Group to supplement business value for

stakeholders • Create a broad vision, mission, goals, and targets, as well as ensuring their concrete implementation

and organizational development • Delegate authority and responsibility to senior and lesser management in support of his/her

accountability in creating business value • Be accountable for business performance and integrated business development with long–term

economic returns comparable to those obtained in domestic and overseas petrochemical businesses 052

2007 ANNUAL REPORT

SUBCOMMITTEES

• Develop the Company as an ethical business operation in compliance with the law, morality, and culture • Evolve the organization and its personnel to realize their full potential, create a Company culture, and

professional ethics. Such authority and duties of the President, however, is void whenever there is a conflict of interest in any form resulting from the President’s exercising of his power in relation to the Company or its subsidiaries. In compliance with the Good Corporate Governance principles, at its meeting no. 1/2005 of 7 December 2005, the Board appointed four subcommittees (or ‘committees’) to screen particular critical issues with prudence and efficiency, reporting to the Board. As of 31 December 2007, the structures of these committees were as follows:

1. Audit Committee

The Committee consists of three non-executive, independent directors qualified under the announcement of SET:

Name

Position

Mr. Olarn Chaipravat Mr. Manu Leopairote * Mr. Paibulya Punyavutti

Chairman Director Director

Note: *Mr. Manu Leopairote was appointed in place of Gen. Yuthasak Sasiprapha on 26 January 2007.

Mr. Adison Vichaikatka, Vice President, Internal Audit Department, served as the secretary to the Committee.

The Committee’s term is three years, or upon their retirement or removal from the Board. Nevertheless, the Committee may be re-appointed by the Board for up to another term unless the Board decides otherwise. The Committee has the following authority and responsibilities: (1) Review the accuracy and adequacy of disclosure of financial reports (2) Review the suitability and effectiveness of the internal control system, risk management, and

internal audit (3) Review the Company’s compliance with securities and exchange laws, regulations of SET, and

laws relevant to the Company’s business (4) Select and table its choice of external auditor, as well as its fees, to the Board for approval (5) Scrutinize the disclosure of Company information about connected transactions or transactions

with potential conflicts of interest to ensure their accuracy and completeness (6) Prepare a report on its supervision for disclosure in the Company’s annual report. This report

must be signed by its Chairman (7) Provide recommendations to the management on the appointment, transfer, and removal of the

manager of the internal audit department, as well as performance evaluation to decide his/her

annual merit award (8) Review the charter of the Committee and propose revisions to the Board for approval (9) Approve the charter of the internal audit department PTT CHEMICAL PUBLIC COMPANY LIMITED

053

(10) Align the Audit Committee, management, internal audit department, and auditor to ensure

compatible perspectives about the audit, and consider the scope of the audit and audit plan of

the internal auditor and the external auditor to ensure consistency and cooperation (11) Jointly with the internal auditor, review and examine audit results, observations, and recommendations (12) Jointly with the auditor, review and examine financial reports, observations, and recommendations (13) Encourage the Company to conduct its processes, maintenance activities, and others efficiently,

effectively, and safely, with due prevention or mitigation of environmental impacts (14) Seek advice from an independent outside advisor where necessary at the Company’s expense (15) Report its performance to the Board (16) In the course of its performance, if any transaction or act that may significantly affect the

Company’s financial status and performance is found or suspected, the Committee must report it

to the Board for rectification within a suitable period. Those transactions and acts include: • Transactions involving a conflict of interest • Fraud, irregularity, or significant defects in the internal control system • Violation of the securities and exchange law, regulations of SET, or laws relevant to the

Company’s business (17) If the Board or the management fails to rectify such transaction or act under (16), any member

of the Committee may report such transaction or act to the Office of the Securities and Exchange

Commission (SEC) or to SET (18) Conduct self-assessment in regard to its own performance and accomplishment under the

assigned duties and responsibilities (19) Perform any other duty assigned by the Board within its scope of responsibility (20) Perform any other duty specified in the Articles of Association. Accountability The Committee is directly accountable to the Board, which is accountable for the Company’s conduct with regard to third parties.

2. Nominating Committee

The Committee consists of three directors, one of whom must be an independent director. For 2007, it consisted of:

Name

Position

Mr. Pala Sookawesh Mr. Olarn Chaipravat Mr. Prajya Phinyawat

Chairman Director (independent director) Director

Appointed to a three-year term, the Committee has the following authority and responsibilities: (1) Recruit and select nominees for directors and the President (2) Devise transparent criteria and selection procedures for directors and the President (3) Recruit and select qualified nominees as new directors or the President and submit their names to the Board and/or a shareholders’ meeting. Accountability The Committee is directly accountable to the Board, which is accountable for the Company’s conduct with regard to third parties. 054

2007 ANNUAL REPORT

3. Remuneration Committee

This Committee consists of three directors, one of whom must be an independent director. For 2007,

it consisted of:

Name

Position

Mr. Pala Sookawesh Mr. Pichai Chunhavajira Mr. Paibulya Punyavutti

Chairman Director Director (independent director)

Appointed to a three-year term, the Committee has the following authority and responsibilities on behalf of the Board: (1) Consider criteria for compensation for the directors and the President (2) Devise criteria and procedures for fair and reasonable compensation to the Board and the

President, and submit details of the Board’s compensation to a shareholders’ meeting for approval.

Accountability The Committee is directly accountable to the Board, which is accountable for the Company’s conduct with regard to third parties.

4. Corporate Governance Committee

The Committee consists of three directors, one of whom must be an independent director. For 2007,

it consisted of:

Name

Position

Mr. Manu Leopairote Mr. Prajya Phinyawat Mr. Pichai Chunhavajira*

Chairman (independent director) Director Director

Note: * Mr. Pichai Chunhavajira was appointed by the Board on 26 January 2007, in place of Gen. Yuthasak Sasiprapha.

Appointed to a three-year term, the Committee has the following authority and responsibilities on behalf of the Board: 1. Propose PTT Chemical’s good corporate governance guidelines to the Board 2. Advise the Board on good corporate governance matters 3. Supervise the Board and the management under good corporate governance principles 4. Review the Company’s good corporate governance principles and ensure alignment with

generally accepted practices 5. Assign good corporate governance policies to the corporate governance task force.

Accountability The Committee is directly accountable to the Board, which is accountable for the Company’s conduct with regard to third parties.

PTT CHEMICAL PUBLIC COMPANY LIMITED

055

COMPANY SECRETARY

To comply with the principles of good corporate governance for listed companies, the Company has appointed the vice president - corporate governance and secretary, office of the president, as Company Secretary, in charge of providing legal and regulation advice to the Board and the management of the Company. The Company Secretary supervises Board activities and coordination to ensure compliance with the resolutions of the Board, and operate Board meetings and shareholders’ meetings. He/she also ensures proper documentation, including that for Company directors’ roster, meeting notices, and meeting minutes. In compliance with the amendment to the Securities and Exchange Act B.E. 2535 (1992), requiring listed companies to have a Board-appointed Company Secretary, the Company would in time ensure that this is done.

BOARD OF DIRECTORS’ MEETINGS AND COMPENSATION 1. Board Meetings

In 2007, the Board and Subcommittees held many meetings, summarized as follows:

Meetings in 2007 Board of Directors Audit Committee Nominating Committee Remuneration Committee Corporate Governance Committee

7 6 1 (The detailed attendance records appear on page 57)

2. Compensation for the Board

According to the 2007 AGM, held on 19 April 2007, the compensation and bonuses were paid to directors and subcommittees as follows: (1) The compensation for directors and subcommittees from 19 April 2007, onward appears below:

Compensation

1. Board’s Compensation • Monthly Compensation • Meeting Compensation

Compensation Rate

• Chairman: Baht 50,000 • Board members: Baht 40,000/person • None

2. Subcommittee Compensation For each meeting: • Audit Committee - Chairman: Baht 40,000 • Nominating Committee - Board members: Baht 30,000/person • Remuneration Committee • Corporate Governance Committee (2) Directors’ bonuses for 2007 amounted to Baht 51.92 million, or 0.3% of the Company’s net

profits of 2007, with the terms of each director taken into account. As a rule, the Chairman

received 25% more than other directors.

056

2007 ANNUAL REPORT

In addition, with the approval of the AGM of 26 April 2006, PTT Chemical awarded ESOP warrants for 29,000,000 common shares under an ESOP scheme to directors, executives, consultants, employees, and secondments from PTT Plc and its subsidiaries who served PTT Chemical.

3. Meeting Attendance and Compensation for the Board and Subcommittee in 2007 Meetings Monthly Attended Compen- Name Position /Number sation/ of Meetings

1. Mr. Pornchai Ruchiprapa Chairman 6/7 (appointed as Chairman in place of Mr. Cherdpong Siriwit, effective from 1 July 2007) 2. Mr. Prasert Bunsumpun Vice Chairman 6/7 3. Mr. Olarn Chaipravat Director 6/7 Chairman, Audit Committee 6/6 Nominating Committee Member 1/1 4. Mr. Manu Leopairote Director 7/7 Chairman, Corporate Governance Committee 3/3 Audit Committee Member 6/6 5. Mr. Pala Sookawesh 6/6 Director Chairman, Remuneration Committee 1/1 Chairman, Nominating Committee 1/1 6. Mr. Cherdpong Siriwit (resigned Director 7/7 as Chairman on 30 June 2007) 7. Mr. Tongchat Hongladaromp Director 5/7 8. Lt. Gen. Sujin Muakkaew Director 5/5 (appointed in place of Gen. Yuthasak Sasiprapha on 23 February 2007) 9. Mr. Paibulya Punyavutti Director 5/7 Audit Committee Member 5/6 Remuneration Committee Member 1/1 10. Mr. Pichai Chunhavajira Director 6/7 Remuneration Committee Member 1/1 Corporate Governance Committee Member 2/3 PTT CHEMICAL PUBLIC COMPANY LIMITED

Meeting Compen- sation

Bonus Paid in 2007

504,000.00

3,404,590.16

444,000.00 444,000.00

- -

3,404,590.16 3,404,590.16

230,000.00

- 20,000.00 - 444,000.00 - 3,404,590.16 -

110,000.00

- 170,000.00 - 444,000.00 - 3,404,590.16 -

30,000.00

- 30,000.00 - 504,000.00 - 4,255,737.76 444,000.00 390,428.57

- -

3,404,590.16 -

444,000.00 - 3,404,590.16 - 140,000.00 - - 20,000.00 - 444,000.00 - 3,404,590.16 -

20,000.00

50,000.00

- 057

Meetings Monthly Attended Compen- /Number sation/ of Meetings

Name Position

11. Mr. Prajya Phinyawat 12. Mr. Cholanat Yanaranop 13. Mr. Roongrote Rangsiyopash 14. Mr. Pichit Nithivasin 15. Mr. Aditheb Bisalbutr (excluding compensation as Company executive)

Director Nominating Committee Member Corporate Governance Committee Member Director Director Director Director

Meeting Compen- sation

Bonus Paid in 2007

7/7

444,000.00

3,404,590.16

1/1

20,000.00

3/3 4/7 5/7 7/7 7/7

- 80,000.00 - 444,000.00 - 3,404,590.16 444,000.00 - 3,404,590.16 444,000.00 - 3,404,590.16 444,000.00 - 3,404,590.16

4. Changes in Composition of Board and Subcommittees from January to December 2007

• Gen. Yuthasak Sasiprapha resigned from the Board on 9 January 2007. • Lt. Gen. Sujin Muakkaew was appointed to the Board in place of Gen. Yuthasak Sasiprapha

on 23 February 2007. • Mr. Manu Leopairote was appointed to the Audit Committee in place of Gen. Yuthasak Sasiprapha

on 26 January 2007. • Mr. Pichai Chunhavajira was appointed to the Corporate Governance Committee in place of Gen.

Yuthasak Sasiprapha on 26 January 2007. • Mr. Cherdpong Siriwit, who resigned as Chairman of the Board, was replaced by Mr. Pornchai Rujiprapa

on 1 July 2007.

5. Compensation for Directors who Serve as Directors of the Company Subsidiaries

The directors serving in subsidiaries’ Boards conduct the businesses under business policies of the group, and their compensation as board members of major subsidiaries in 2007 appears below: • TOC Glycol Company Limited (TOCGC): PTT Chemical holds all shares

Name

Position

Compensation (Baht)

1. Mr. Aditheb Bisalbutr Chairman 348,000 • Bangkok Polyethylene Public Company Limited (BPE): PTT Chemical holds all shares

Name

Position

1. Mr. Pala Sookawesh

Chairman 2. Mr. Prajya Phinyawat Director 3. Mr. Tongchat Hongladaromp Director • Thai Tank Terminal Limited (TTT): PTT Chemical holds 51% shares

Name

1. Mr. Aditheb Bisalbutr

058

Position

Director

Compensation (Baht)

860,000 760,000 540,000 Compensation (Baht)

522,978.72 2007 ANNUAL REPORT

6. Shareholding of Directors (as of 31 December 2007) Name/Position

1. Mr. Pornchai Rujiprapa Chairman

As of 31 December 2006 (Paid-up Capital: 14,901,153,000 Baht) % Shareholding

As of 31 December 2007 (Paid-up Capital: 14,965,716,000 Baht) % Shareholding

Change during the year (Share)

ESOP Warrant (Unit)

(141,281)

75,000

(116,400)

75,000

15,000

75,000

(65,000)

75,000

25,000

75,000

15,000

75,000

25,000

75,000

2. Mr. Prasert Bunsumpun 0.009481% - Vice Chairman 141,281 3. Mr. Olarn Chaipravat 0.007811% - Director 116,400 4. Mr. Manu Leopairote 0.001002% - Director 15,000 5. Mr. Pala Sookawesh 0.003523% 0.007901% Director 117,734 52,734 6. Mr. Cherdpong Siriwit - - Director 7. Mr. Tongchat Hongladaromp - - Director 8. Lt. Gen. Sujin Muakkaew - - Director 9. Mr. Paibulya Punyavutti - - Director 10. Mr. Pichai Chunhavajira 0.001670% - Director 25,000 11. Mr. Prajya Phinyawat 0.001002% - Director 15,000 12. Mr. Cholanat Yanaranop - - Director 13. Mr. Roongrote Rangsiyopash - - Director 14. Mr. Pichit Nithivasin 0.001670% - Director 25,000 15. Mr. Aditheb Bisalbutr 0.033744% 0.054150% 505,004 President and Secretary 806,904 to the Board

PTT CHEMICAL PUBLIC COMPANY LIMITED

(301,900) 144,400

059

7. Shareholding by Company Executives (as of 31 December 2007)

Name/Position

As of 31 December 2006 (Paid-up Capital: 14,901,153,000 Baht) % Shareholding

As of 31 December 2007 (Paid-up Capital: 14,965,716,000 Baht) % Shareholding

Change during the year (Share)

ESOP Warrant (Unit)

1. Mr. Sahaschai Panichapong 69,400 0.008053% 0.004677% (50,000) Senior Executive Vice President- 120,000 70,000 Oleochemicals 2. Ms. Panada Kanokwat 0.000105% 0.000105% 92,500 Senior Executive Vice President- 1,570 1,570 Corporate Finance & Accounting 3. Mr. Khubbhol Suksupha 0.000868% Senior Executive Vice President 13,000 69,400 13,000 Seconded to PTT Plc 4. Mr. Jiamsak Nantananate 0.003977% 0.005504% Executive Vice President- 59,274 82,374 23,100 69,400 Operation Excellence (including 59,274 shares held (including 59,274 shares held by spouse) by spouse) 5. Mr. Athavudhi Hirunburana 0.003187% 0.003172% 47,486 Executive Vice President- 47,486 69,400 Organizational Effectiveness (including 15,305 shares held (including 15,305 shares held by spouse) by spouse) 6. Mrs. Puntip Oungpasuk 0.002191% Executive Vice President- 32,652 0.002150% (471) 69,400 Strategy & International Affairs (including 471 shares held 32,181 by spouse) 7. Mr. Dhanes Charoensupaya Executive Vice President- 69,400 -* Marketing, Commercial & Supply Chain Governance 8. Mr. Veerasak Kositpaisal Executive Vice President- 69,400 Polymer Products Value Center 9. Mr. Narong Bunditkamol 0.002766% Executive Vice President- 41,396 82,500 -* Olefins & Shared Facilities (including 15,698 shares held by spouse) 10. Mr. Suvit Tinnachote Executive Vice President- 0.001706% 69,400 -* EO Based Performance 25,543 Products Value Center 11. Mr. Pramern Siripakdee Vice President-Corporate 47,000 Finance Policies & Investor Relations 12. Mr. Theerapol Muenpakdee 0.000668% 10,000 28,500 Vice President-Corporate 10,000 Management Accounting

Note: * Number 7, 9, 10 are reporting for the first time since the restructuring, as of 1 February 2007.

060

2007 ANNUAL REPORT

EXECUTIVES

Senior Company executives, including the President, are appointed by a majority vote of the Board.

Mr. Aditheb Bisalbutr, Mr. Sahaschai Panichapong, Ms. Panada Kanokwat, Mr. Veerasak Kositpaisal, and Mr. Khubbhol Suksupha are secondments of PTT PLC. Retiring on 31 December 2007 were Mr. Payont Koomrampai, Senior Executive Vice President, and

Mr. Manope Kerdlappol, Executive Vice President. (The names and profiles of these appear on page 44) Executive Remuneration in 2007

EMPLOYEES

Remuneration

Total (Person)

Total Salaries Fringe Benefits Contribution to the Provident Fund Total

13 13 13 13

Remuneration (Baht)

49,506,223.68 26,203,446.00 4,950,622.37 80,660,292.05

PTT Chemical employees as of 31 December 2007 were 1,416 (including 5 secondments from PTT PLC). Employee Compensation in 2007

Type

Total (Person)

Compensation (Bath)

Total Salaries Fringe Benefits Contribution to the provident Fund Total

1,402 1,402 1,393 1,402

717,197,349.55 375,366,818.84 66,630,049.86 1,159,194,218.25

Salary and other compensation: The salary, the main compensation paid to employees for their service, is based on the job value to the Company and complemented by daily allowances, lodging, overtime, etc. Annual bonus: This variable payment, based on business performance, is subject to the approval of the Board each year. Provident Fund: This welfare scheme, designed to reward service with loyalty to the Company, is based on employeesâ&#x20AC;&#x2122; years of service. It amounts to 5-10% of the monthly pay.

PTT CHEMICAL PUBLIC COMPANY LIMITED

061

062

2007 ANNUAL REPORT

Mr. Aditheb Bisalbutr Mr. Sahaschai Panichapong Ms. Panada Kanokwat Mr. Khubbhol Suksupha Mr. Jiamsak Nantananate Mrs. Puntip Oungpasuk Mr. Athavudhi Hirunburana Mr. Dhanes Charoensupaya Mr. Narong Bunditkamol Mr. Veerasak Kositpaisal Mr. Suvit Tinnachote Mr. Pramern Siripakdee Mr. Theerapol Muenpakdee

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

X / / / / / / / / / / / / / /, // X

/ /

/ /, //

/ /

/ / /

// //

/, // /

/ /

EFT TFA PTTICT

PPTTUT PTTPM API

// // /

= PTT Utility Co., Ltd. = PTT Polymer Marketing Co., Ltd. = Alliance Petrochemical Investment (Singapore) Pte. = Eastern Fluid Transport Co., Ltd. = Thai Fatty Alcohol Co., Ltd. = PTT ICT Solutions Co., Ltd.

// = Management X = Chairman

/, // /

X /

= NPTC Maintenance & Engineering Services Co., Ltd. = NPC Safety and Environmental Service Co., Ltd.

/ = Director

ASSOCIATES VNT = Vinythai PLC PPCL = PTT Phenol Co., Ltd.

NPC S&E

NPTC

//, / X // // / // // // / // / // // // // / // // Remarks

SUBSIDIARIES TOCGC = TOC Glycol Co., Ltd. TCC = Thai Choline Chloride Co., Ltd. TEA = Thai Ethanolamines Co., Ltd. TOL = Thai Oleochemicals Co., Ltd. TEX = Thai Ethoxylates Co., Ltd. BPE = Bangkok Polyethylene PLC PTTPE = PTT Polyethylene Co., Ltd. TTT = Thai Tank Terminal Ltd.

MANAGEMENT

Mr. Pornchai Rujiprapa Mr. Prasert Bunsumpun Mr. Olarn Chaipravat Mr. Manu Leopairote Mr. Pala Sookawesh Mr. Tongchat Hongladaromp Lt. Gen. Sujin Muakkaew Mr. Cherdpong Siriwit Mr. Paibulya Punyavutti Mr. Pichai Chunhavajira Mr. Prajya Phinyawat Mr. Cholanat Yanaranop Mr. Roongrote Rangsiyopash Mr. Pichit Nithivasin Mr. Aditheb Bisalbutr

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

DIRECTOR

NAME

SUBSIDIARIES

X /

/ X

X / /

/ /

/ X

RELATED COMPANIES PTT = PTT PLC BST = SCG = The Siam Cement PLC PTTAR = HMC = HMC Polymers Co., Ltd. ROC = TPE = Thai Polyethylene Co., Ltd. SSMC = TPP = Thai Polypropylene Co., Ltd. SPRC = TPC = Thai Plastic and Chemicals PLC SIAM MITSUI TIG = Thai Industrial Gas PLC PACIFIC BIG = Bangkok Industrial Gas Co., Ltd.

X /

/ / /

Bangkok Synthetics Co., Ltd. PTT Aromatics and Refining PLC Rayong Olefins Co., Ltd. Siam Styrene Monomer Co., Ltd. Star Petroleum Refining Co., Ltd. = Siam Mitsui PTA Co., Ltd. = Pacific Plastics (Thailand) Co., Ltd.

DHIPAYA IRPC PTTPL

THAPPLINE

= Thai Petroleum Pipeline Co., Ltd. = Dhipaya Insurance PLC = IRPC PLC = PTT Polymers Logistic Co., Ltd.

/ /

AS OF FEBRUARY 1, 2008

X /

ASSOCIATES / RELATED COMPANIES

DETAIL OF DIRECTORS AND MANAGEMENT OF PTT CHEMICAL AND ITS SUBSIDIARIES, ASSOCIATES AND RELATED COMPANIES

REPORT OF THE CORPORATE GOVERNANCE COMMITTEE

The Corporate Governance Committee, chaired by Mr. Manu Leopairote and consisted of Mr. Prajya Phinyawat and Mr. Pichai Chunhavajira. This committee was appointed by the Board of Directors to be responsible for proposing practical guidelines for corporate governance, as well as making recommendations for and promoting corporate governance as a culture of PTT Chemical. Since the Company’s formation on 7 December 2005, the Board’s policy has been issued in writing and constantly implemented.

MEETINGS AND PERFORMANCE

Committed to good corporate governance and aiming for international-standard practices, in 2007 this committee held three meetings as summarized below: 1. Reviewed, recommend on, and concurred with a move to update and amend the Good Corporate

Governance Handbook to embrace a Code of Business Conduct to align with the amendment to

regulations and criteria issued by regulatory agencies and evolving business circumstances; 2. Amended the guidelines for promoting the rights and equality of shareholders through allowing

them to nominate qualified candidates for directors in advance of the 2008 annual general

meeting of shareholders (AGM) and propose additional agenda items and submit questions in

advance; 3. Deliberated the 2007 assessment of corporate governance practices based on the SET-

improved CG self-assessment criteria. The committee made recommendations for additional

amendment where the Company’s practices had not fully aligned with that of SET; 4. Reviewed and issued a policy of continuous improvement of the quality of AGMs. Incidentally, the

2007 AGM was rated as ‘excellent’, an improvement over ‘good’ in the previous year; 5. Deliberated the improvement of the Board assessment criteria in 2007 to compliance with

international best practices, focus on applying their findings in the amendment to Board

performance to achieve international standards; 6. Reviewed the terms for the Audit Committee members at the request of that committee and

concluded that they could serve only two consecutive terms unless the Board should consider

otherwise. This conclusion was tabled for the consideration of the Board in line with good

corporate governance principles; 7. Proposed guidelines in compliance with the SEC and SET recommendations, namely the

closing date of the share registration book and the share transactions involving the directors and

the management before and after the disclosure of inside information; 8. Required a written charter for each committee, which was also to appear in the Good Corporate

Governance Handbook;

PTT CHEMICAL PUBLIC COMPANY LIMITED

063

9. Required an annual performance report by each committee for disclosure in the annual report

and Form 56-1; 10. Required that new directors meet senior management to hear a briefing on Company business

direction; 11. Required that the Board and senior management undergo training at the Thai Institute of Directors

(IOD); 12. To foster confidence among shareholders and stakeholders, both inside and outside the

Company, approved the 2007 corporate governance supervision plan, which complied with

SETâ&#x20AC;&#x2122;s good corporate governance principles and those of the Organisation for Economic

Co-operation and Development (OECD).

The Corporate Governance Committee would like to thank the Board, the management, and all relevant

parties for their excellent cooperation. Specifically, in showing their appreciation of corporate governance, the Board and the management concurred that it not only was critical to sustainable business operation, but also underpinned efficient business execution.

(Mr. Manu Leopairote) Chairman

064

2007 ANNUAL REPORT

REPORT OF THE NOMINATING COMMITTEE

Recognizing the significance of compliance with good corporate governance principles, the Board of Directors appointed the Nominating Committee, with Mr. Pala Sookawesh as its Chairman and Mr. Olarn Chaipravat and Mr. Prajya Phinyawat as its members. In performing assignments for the Board, the committee issues transparent criteria for the recruitment and selection of those to be nominated as directors, and then propose them to the Board, and the AGM for approval.

MEETINGS AND PERFORMANCE

In 2007 this committee met to perform these duties for the Board: 1. Deliberated the names of the directors that had completed their terms under Company regulations,

namely Mr. Tongchat Hongladaromp, Mr. Pornchai Rujiprapa, Mr. Pichai Chunhavajira, Mr. Cholanat

Yanaranop, and Mr. Pichit Nithavasin. After considering their qualifications, experience, skills, and

suitability in the best interests of the Company, the Nominating Committee proposed their

reappointment, which was the Boardâ&#x20AC;&#x2122;s proposal to the annual general meeting of shareholders

(AGM), where this proposal was approved; 2. Deliberated the qualifications of Lt. Gen. Sujin Muakkaew and forwarded his name to the Board as

the replacement for Gen. Yuthasak Sasiprapha, who had resigned before the expiry of his term. Performing its duties to foster the confidence among shareholders and stakeholders in the recruitment and selection processes for directors and senior management, this committee fully observed transparent actions in line with the Companyâ&#x20AC;&#x2122;s criteria and procedures. Its main consideration is the qualifications of those that can enhance the performance of the Board as a whole, which will in turn add long-term value to PTT Chemical. (Mr. Pala Sookawesh) Chairman

PTT CHEMICAL PUBLIC COMPANY LIMITED

065

REPORT OF THE REMUNERATION COMMITTEE

Adhering to good corporate governance principles for listed companies, the Board of Directors appointed the Remuneration Committee as one of its committees, consisting of Mr. Pala Sookawesh as Chairman, and Mr. Paibulya Panyavutti and Mr. Pichai Chunhavajira as members. The committee devises a fair and rational approach, procedures, and criteria for compensation paid to directors, committee members, and the President and tables these to the Board for approval.

MEETINGS AND PERFORMANCE

In 2007 the committee, with all members in attendance, met to perform these duties for the Board: 1. Decided on the amended compensation for directors and committee members and tabled them

for the approval of the 2007 AGM, based on the current compensation in relation to companies

under the PTT Group and the petrochemical industry. Such compensation reflects the additional

responsibilities of the directors due to the Company’s additional investment and business

expansion, as well as performance for the year. The shareholders concurred with the

committee’s proposed compensation rises as follows: • The Chairman’s monthly compensation, from Baht 40,000 to Baht 50,000 • Directors’ monthly compensation, from Baht 30,000 to Baht 40,000 • Committee chairmen’s compensation, from Baht 30,000 to Baht 40,000 per meeting • Committee members’ compensation, from Baht 20,000 to Baht 30,000 per meeting; 2. Deliberated a proposal for 2006 directors’ bonuses in line with Company performance or its net

profits and with industry peers. The total bonuses amounted to Baht 51.92 million, or 0.3% of

the year’s net profits. Service periods for individual directors were taken into account and the

Chairman would receive 25% more, all of which were approved by the shareholders; 3. Decided on the compensation for the President against his performance appraisal, which

contained mutually-decided criteria. Valuing the significance of instituting processes and a policy to deliberate and disclose the compensation paid to directors and senior management, the committee took into consideration the correlation between Company performance, directors’ responsibilities, compensation magnitudes, and standards for measuring and assessing performances, with a primary focus on the long-term interests of the Company, the shareholders, and stakeholders. (Mr. Pala Sookawesh) Chairman 066

2007 ANNUAL REPORT

REPORT ON CORPORATE GOVERNANCE

The Board of Directors of PTT Chemical Plc recognizes the significance of doing business under the principles of good corporate governance by ensuring responsible compliance and with regard for the rights of all stakeholders while performing complete duties suitably and in line with prevailing circumstances. PTT Chemical strives to improve and evolve its good corporate governance practices on par with international standards. In 2007, the Board focused on ensuring the Company’s compliance in five main categories for listed companies on the Stock Exchange of Thailand (SET).

RIGHTS OF SHAREHOLDER

Principle: Shareholders’ rights should be protected and the exercising of such rights encouraged. Company practice: The Board values shareholders’ rights by refraining from violating or infringing on such rights. This has been made a policy and disclosed in the Company’s handbook of good corporate governance. In 2007 the Board encouraged and supported this through the following actions. • Fundamental legal rights: PTT Chemical facilitated the exercising of the right to receive fair

dividends and the management of share transfers by reliable registrars. • Right to receive significant information: PTT Chemical disclosed up-to-date information through its

website for shareholders to stay abreast of significant Company news, changes, and the information

disclosed under regulations. As a rule, after disclosure to the Stock Exchange of Thailand (SET), this is

posted on the website in both Thai and English. It also organized Company visits for shareholders and

investors, as well as meetings with executives to keep updated on Company business. Its investor

relations unit communicates and addresses queries about changes or issues of current interest. In

addition, together with the Thailand Securities Depository Co., Ltd., it launched a ‘Thai Shareholders

Day’ to disseminate Company information directly to shareholders. • Right to attend meetings and vote: PTT Chemical facilitated all shareholders’ attendance at

meetings and exercising of their votes. In the annual general meeting (AGM) of 2007, it instituted a

management system to promote and support such rights before the meeting date, during the

meeting, and after the meeting date as detailed in AGM Checklist published by the Securities and

Exchange Commission (SEC). In addition, the Corporate Governance Committee investigated the

assessment findings of the AGM for ways to further improve the efficiency of future shareholders’

meetings.

PTT CHEMICAL PUBLIC COMPANY LIMITED

067

EQUITABLE TREATMENT OF SHAREHOLDERS

Principle: All shareholders should be treated equitably and fairly. Company practice: To ensure the shareholders of Equitable and fair treatment, the Board has ensured that the Company observes the following: • Fair exercising of shareholders’ rights at Annual General Meetings (AGM) Before the meeting date: • The Company allows each shareholder to propose agenda items for consideration at their meeting

ahead of the actual meeting date and also to nominate candidates for directors. The Corporate

Governance Committee has instituted criteria for this, taking into account SET’s best practices,

comparison with leading listed companies, and its own business circumstances. • Shareholders are allowed to submit written questions about agenda items to the Board ahead of the

meeting date through its website, by telefax, and by letter. • Meeting notices and documents are disseminated through its website 30 days ahead of the meeting

date. These are identical to what the Company mails to the shareholders 14 days ahead of the date to

allow time for shareholders to study information. For good measure, it also publicizes this through

SET’s channels. • Adequate and clear information is disclosed in the meeting notice to allow shareholders to decide on

each agenda item, and does not add or modify crucial information without notifying them in advance. • Through the meeting notice, the Company informs shareholders of meeting participation criteria,

providing them with a list of all independent directors on proxy forms designed by the Ministry of

Commerce, to encourage them to choose their voting methods. These proxy forms also provide for

shareholders’ written opinions on balloting. Meeting date: • Registration is allowed through the bar-code system two hours ahead of the meeting, and even after

that, it allows shareholders who still want to attend the meeting to do so and register their attendance

without losing their rights. • Before the meeting begins, the Chairman informs the meeting about the meeting criteria and ground

rules as well as the procedures for balloting. • Ballots are used for critical agenda items, including the appointment of directors. The Board allows

shareholders to vote for directors individually, and a team is assigned to verify the ballot counting. • As a rule, the Chairman, the President, and the Subcommittee Chairmen attend these meetings to

explain and clarify questions posed by shareholders, who can do so on matters relating to agenda

items or the Company. The Chairman introduces the directors and executives, as well as relevant

attendees at each meeting. After the meeting date: • The Company Secretary records all significant information at an AGM, consisting of the list of

attending and absent directors, significant explanations, questions/answers/comments, ballot casting

and counting, and resolutions (broken down into votes for, votes against, and abstentions). He/she is

068

2007 ANNUAL REPORT

not only to disseminate the minutes through the Company’s website within 14 days from the meeting

date, but also ensures good meeting documentation that favors scrutiny and reference. • To ensure shareholders of full dividend payment, after the payment has been made as approved by

AGM, the Company notifies them about the outcome of deliberation through SET’s channels to enable

them to know their rights, date, time, and amount of dividend payment. In addition, the Company is to

announce to shareholders the rights and channels for verifying such rights after the closing of the

share registration book to protect their rights. Control and Prevention of the Use of Inside Information • Directors and the management are required report to SEC all changes in share ownership under

Article 59 of the Securities and Exchange Act. • The Corporate Governance Committee, for good practices, has instructed directors and the

management to refrain from buying and selling Company shares 45 days before the public release of

the Company’s financial statements and one day after their disclosure to SET. • The Company prepares an annual information disclosure table for the Board’s and the management’s

reference on when to avoid engaging in share transactions. • Written guidelines for maintaining and preventing the use of inside information are instituted for all to

observe, with regular follow-ups. • In deliberating and approving connected transactions, disclosure is to be made about the interests of

directors, the management, and connected parties, the value of each transaction, the views of

independent directors, and related information to allow the Board or shareholders to make proper

decisions for the benefit of the Company. • Guidelines are issued to prevent directors, executives with vested interests, and those connected in

one way or another from taking part in decision-making on a given connected transaction.

Specifically, anyone who is connected with a transaction will be removed from any involvement with

that agenda item.

ROLES OF STAKEHOLDERS

Principle: Stakeholders should be duly taken care of, and cooperation should be promoted among them. Company practice: In its Good Corporate Governance Handbook, designed for all to observe, the Board has instituted a policy to treat individual groups of stakeholders in line with their legal rights and agreements with the Company, while developing formats and approaches for stakeholder participation in fostering sustainable performance. Such policy and measures are outlined below. Shareholders: The Company is committed to creating the highest satisfaction for shareholders through its consideration of sustainable Company growth, continually suitable return on investment, and transparent action along with reliable accounting systems. Customers: The Company is committed to creating customers’ satisfaction and confidence through providing quality goods and services at fair prices. A customer satisfaction measurement is used to aid decisions relating to improving and maintaining sustainable relationships. Business partners, competitors, and creditors: The Company takes into account business equality, PTT CHEMICAL PUBLIC COMPANY LIMITED

069

integrity, and mutual benefit through strict compliance with the law, rules, and its code of business conduct. It is also committed to fair competition and complies strictly with the terms of all agreements with creditors. Employees: Recognizing employees as a key to its success, the Company has a clear policy to develop a learning organization with a culture and atmosphere conducive to teamwork with fair compensation. The Company ensures work safety and maintains a good workplace while valuing knowledge development and transfer and listening to opinions and recommendations from all employees alike. Finally, apart from deciding the Company culture, it strives to build on that culture. (Details of employee care appear on page 26-27). Communities and society: Out of its consideration for the quality of life for communities and society – both around its plants and at the national level – the Company deliberates matters of direct impact to business and expands to social responsibility by cultivating an awareness of such responsibility among all employees in an earnest and continuous way. Other activities consisted of inviting community representatives to an open house at the plant and meet executives to share views and recommendations,

as well as sharing community concerns, problems, and solutions. The Company’s community relations team regularly visits communities to foster cordial relations. the Company establishing shared values between the society within which we live and the business that we do in order to grow together in a tenacious and sustainable way. (Details of Company CSR appear on page 29). Environment: Valuing the environment, the Company considers it a social duty to take part in environmental and natural resource stewardship. From the stage of plant design, production technology selection, to waste disposal processes, it considers business operation impacts on the environment. An innovation research and development (R&D) department has been instituted to promote efficient energy applications. An annual report of its safety, occupational health, and environmental operation discloses information for stakeholders. (Details of Company policy on environment appear on page 31). In taking good care of all stakeholders mentioned above, the Company primarily recognizes the mechanism of participation by stakeholders and devises a policy/measure for compensation in case of damage to their legal rights. In addition, it has instituted a communication channel with the Board of Directors to enable parties to make useful and value-adding recommendations through email at cg@pttchem.com, to be handled by the Company Secretary, who will forward them to relevant committees and eventually to the Board.

DISCLOSURE AND TRANSPARENCY

Principle: The Company’s significant information should be disclosed accurately, completely, equitably, reliably, and in a timely manner. Company practice: The Board recognizes and values the quality of information and fair, transparent, and equitably disclosure through easy access. In 2007, to ensure such disclosure to all stakeholders, it engaged in the following: Complete disclosure of information • The Company fully disclosed significant information, both financial and non-financial, in line with the

criteria of SEC and SET in an accurate, complete, and transparent way, with due screening in line with

070

2007 ANNUAL REPORT

the required procedures. During the year, no case arose of improper disclosure of information.

Regular assessment and efficiency improvement of the disclosure process are made. Each set of

annual financial statements and all quarterly financial statements were prepared, screened, and

submitted to SEC and SET, and disclosed to shareholders and investors ahead of requirements. • The Company ensured that its financial information was accurate, complete, and factual under its

accounting standard, and had undergone perusal by the external auditor and the Audit Committee. To

further foster confidence, the Board also issued a report of its responsibility to financial reports, signed

by the Chairman and the President, in the annual report and accompanied by a report of the external

auditor. The Board’s report covered the Company’s compliance with generally accepted accounting

principles, alignment with its business, and implementation of suitable and consistent accounting

principles. • The Company not only disclosed additional significant information under the good corporate

governance principles in its entirety in the annual report and Form 56-1, but also disseminated this on

its website, with regular updates for completeness. • Each January, the Company organizes meetings between the management and employees so that its

employees may be aware of business strategies and direction, which will serve as guidelines for

performing their duties and responsibilities to supplement value for the Company and its shareholders. Information Disclosure Channels and Responsible Parties • Significant, current, and complete Company information in line with good corporate governance was

posted on the www.pttchemical.com website in both Thai and English, with features accommodating

questions and downloading. In 2008, the Company’s policy is to improve the website to fully reflect

the Company’s value while addressing the needs of all stakeholders. • An investor relations department has been instituted with a responsible owner to serve as a

communication channel with shareholders and investors (both minor and institutional), analysts, and

related parties, including SET and SEC. Top management members take part in running investor

relations activities, including meeting with investors and analysts under an annual schedule,

participating in clarification and question-and-answer sessions on Company operation. Such

information is clearly presented and posted on the website after each meeting. A questionnaire is

prepared to gauge the satisfaction of analysts with the performance of the investor relations unit so

that its work can be made more efficient. • An additional channel for shareholders, investors, analysts, and the interested public is provided to

enable them to investigate additional information at www.pttchemical.com. Alternatively, email the unit

at ir@pttchem.com, which has been publicized in the Company’s assorted media for shareholders and

investors. Finally, an ‘IR News Release’ serves analysts’ interest in other Company information

thoroughly and equitably. • In 2007, the Investor Relations Department conducted the following activities: - International meetings and roadshows with investors in Hong Kong, Singapore, Malaysia, the United

Kingdom, Europe, and the United States. - Roadshows and conferences with local institutional and minor investors - Quarterly meetings with securities analysts to report on Company performance after reporting it to

SET. - A total of 86 company visits and conference calls between Company executives and shareholders,

investors, and analysts as their request. PTT CHEMICAL PUBLIC COMPANY LIMITED

071

- Regular reports to SET via ELCID as required by the SET principles of good corporate governance. - Addressing telephone calls and emails to shareholders, investors, analysts, and concerned agencies. - Disclosure of important Company data through its website under ‘Investor Relations’, including

notifications to SET, shareholders’ meeting notices, and share prices. • A Corporate Communication Department is in place to publicize and disseminate timely news and

movement, activities, and cooperation with agencies for the benefit of the media, including: - Press releases, photo releases, and publications to disseminate Company information, including

brochures, company profiles, and fact sheets. - Press conferences, designed to allow Company executives to explain or clarify Company performance

and investment direction to the media after reporting them to SET. - Media visits to Company operation, as well as petrochemical and chemical business education,

designed to enable them to appreciate the business. - Public relations through the website to expand the Company’s external communication and intranet

communication for employees’ information. Throughout 2007, the Company continually conducted these activities under a plan that aligned with its business operation strategy while paying attention to the quality of disclosed information.

RESPONSIBILITIES OF THE BOARD

Principle: The Board, with a key role in corporate governance for the optimal benefit of the Company, is accountable to shareholders and its management. Company practice: To ensure shareholders and investors that the Company, through the Board, institutes its vision, mission, and operating strategy, along with an efficient process of monitoring and measuring the performance of executives; that the Board is independent of the management and is accountable for its own performance under good corporate governance, the Board supervises the Company’s compliance with these principles as following: Composition of the Board • The Board has deliberated the suitability of the present structure against its core mission of

supervising corporate governance practices and the performance of the management. • In 2007, the Board consisted of 15 directors – 14 non-executives and one executive. Four were

independent directors. Information about the terms of each director appears in the annual report,

Form 56-1, and on the Company website, • The Chairman and the President are two distinct persons with clear separation of roles. While the

Chairman is not an independent director, he has performed his duty with independence, particularly in

expressing his views on the Company’s performance under the Board policy and in the best interests

of the Company, shareholders, and the country. • The Board has not only defined a formal and transparent recruitment procedure for directors, to be

executed by the Nominating Committee, but has made it possible for shareholders to nominate

suitable persons for selection. • The Board consists of experts with diverse skills and management experience in petrochemicals and

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chemicals, the Company’s core products, as well as other disciplines of benefit to the Company. As

proof of such expertise, skills, qualifications, and experience, the Company has disclosed the names,

profiles, education, experience, and shareholding through the annual report, Form 56-1, and

Company website. Independent Directors • To enable independent directors to freely supervise, control, and make decisions on assorted matters,

the Board endorses the definition of independent directors that is stricter than that of SEC. PTT

Chemical’s independent director: - Holds no more than three percent of the shares of the Company, its subsidiaries, associates, or

major shareholders, including related persons as stated under Section 258 of the Securities and

Exchange Act. - Does not participate in the management of the Company, its subsidiaries, associates, or major

shareholders; is not an employee, a regularly paid advisor, or other consultant; has no conflict of

interest; must not have acted in any of the above-mentioned capacities for at least two years

before his/her appointment. - Has no business relationship with, or stands to gain or lose, directly or indirectly, from the financial

performance or management of the Company, its subsidiaries, associates, or major shareholders. - Is not a connected person or a close relative of the management or major shareholders of the

Company, its subsidiaries, or associates. - Is not a juristic person appointed to protect the interest of any director, major shareholder, or

shareholders related to the major shareholders. - Can participate in Board meetings, make important decisions, express opinions independently, and

protect the interests of all shareholders equally. • The Board’s current thinking is to raise the number of independent directors from four at present to at

least one-third of the entire Board and modify the definition of an independent director to align with

the new regulations of SEC. Nevertheless, all independent directors have performed their roles with

dedication and taken the interests of all stakeholders equally into account. Terms of Directors • As stated in Company regulations, each director’s term is three years, in line with that stated in the

Public Company Limited Act. It is also stipulated that the Audit Committee can be in office for up to

three consecutive terms. As for other directors, the Board would ensure that Company practices align

with the good corporate governance principles. • The Board defines the policy for serving as other companies’ directors to suit Company business and

circumstances. Information on such service at other companies appears in the annual report, Form

56-1, and on the Company’s website. A summary of the number of other companies each director

serves has been prepared for acknowledgment. • Recognizing the limit to efficiency of serving as directors, the Board takes seriously the number of

companies where Company directors also serve. Where Company directors serve in more than five

companies with PTT as a major shareholder, such positions are in the business interests of PTT

Chemical, which invests in those companies. • The Board has defined its policy and procedures for serving as directors in PTT Chemical Group for

senior executives from the rank of vice president upward. The President has the delegated authority

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for considering the suitability of such terms and the number of companies each can serve in, to align

the business direction and strategy with the policy of the Group. In practice, the management

committee – consisting of the President and senior executives – defines the approach for appointing

them, including their knowledge about the business, competence, availability to track performance,

and potential to take the business to the stated goals. Each person may take up to eight directorships.

(Details of directorships of senior executives appear on page 37-49). Company Secretary Ms. Walaiporn Puspavesa, Vice President, Corporate Governance and Secretariat Department, has been assigned to serve as Company Secretary. This person is a regular employee (details of Company Secretary on page 56) who can be contacted by email at cg@pttchem.com. Subcommittees In line with the good corporate governance principles, since the Company’s formation in 2005, the Board has appointed four subcommittees (usually referred to simply as ‘committees’) to handle specific tasks with prudence and efficiency. Their compositions and responsibilities are as follows (details appear on page 53): (1) The Audit Committee: This committee consists of three independent directors, all of whom are to be knowledgeable about accounting and finance, with one well-versed in such fields. The Board has endorsed the roles, duties, and responsibilities of the committee in a written charter. In 2007, the charter clause governing the maximum terms for the committee was modified to up to three consecutive terms. The qualifications of the directors followed the criteria, the committee’s performance was regularly reported to the Board, the annual performance appraisals were conducted, the number of meetings was disclosed, along with the number of meetings attended by individual directors, and the performance of the committee against the charter was reported to shareholders in the annual report (page 53), and report of the Audit Committee appears on page 106. (2) The Remuneration Committee This committee consists of three directors, one of whom is to be an independent director. The term of each committee is three years. While the Chairman of this committee is neither the Board Chairman nor an independent director, he has performed his duty in deliberating criteria and format of compensation paid to directors and the management with independence, fairness, transparency, and sensibility. A written charter is being drafted for this committee, whose performance was reported to the Board and shareholders in the annual report (page 55), and report of the Remuneration Committee appears on page 66. (3) The Nominating Committee This committee consists of three directors, one of whom is to be an independent director. The term of each committee is three years. While the Chairman of this committee is neither the Board Chairman nor an independent director, he has performed his duty in deliberating criteria and recruitment process for directors and the President, and selected persons under the recruitment process with independence, fairness, transparency, and sensibility. The Board endorsed the roles, duties, and responsibilities of this committee and a written charter is being drafted for this committee, whose performance was reported to the Board and shareholders in the annual report (page 54), and report of the Nominating Committee appears on page 65. 074

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(4) The Corporate Governance Committee This committee consists of three directors, one of whom is to be an independent director. The term of each committee is three years. While the Chairman of this committee is neither the Board Chairman, he has performed his assigned duty in deliberating practical guidelines for good corporate governance and provided recommendations to the Board for developing such guidelines in line with the practical guidelines of SEC, SET, and international standards. A written charter is being drafted for this committee, whose performance was reported to the Board and shareholders in the annual report (page 55), and report of the Good Corporate Governance Committee appears on page 63. Segregation of roles • The Board has clearly set its authority against that of the management, as stated in its resolution to be adopted by relevant parties. Specifically, the financial authority and the authority to decide on matters

by the President are delegated in writing and valid for three years at a time. • Besides, to achieve the Company’s goals as well as sustained balance among all parties concerned,

while continually supplementing investment value for shareholders, the Board has decided on its

proactive roles, duties, and responsibilities. It has not only endorsed critical operation matters, namely

its vision, mission, strategies, financial goals, risks, plans, and budgets as proposed by the

management and its subcommittees, but also followed up to ensure that the management follows the

defined policy and plans. Corporate Governance Policy and Code of Conduct • The Board endorses these documents, which cover the Board, the management, and all employees in

writing and encompass all five categories of good corporate governance. A Good Corporate

Governance Handbook has been disseminated through the website for external communication, and

to ensure that all employees understand and comply with these, there is an intranet ‘CG Knowledge’

page containing all relevant information and tips for corporate governance. • Through the Corporate Governance Committee, the Board institutes assessment of compliance with

the policy. An annual revision and assessment of performance is conducted. In 2007 the committee

modified the handbook to further align with the principles under the CG Self-Assessment of SET. The

revision, due for completion in 2008, will be published and disseminated as PTT Chemical Group’s

policy for corporate governance for use as a practical guideline by the Board, the management, and

all employees within the group. Conflicts of Interest • The Board determines policies and guidelines for dealing with transactions with potential conflicts of

interest among shareholders, the Board, the management, and other connected parties through the

screening of the Audit Committee. These elements are clearly detailed in the Good Corporate

Governance Handbook. Under the process of internal control, there are also measurements to

oversee and review transactions between the Company and anyone with potential conflicts of interest

so that such transactions are fair, sensible, and in the interests of shareholders. • The Board ensures prudent compliance with the stated procedures within reason and with mutual

independence, transparency of transactions, and maximum benefit to the Company, considered

accurate and complete by SET’s criteria. • At each Board meeting, the Chairman reminds the directors of this policy, asks those directors to

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declare potential conflicts of interest on any agenda item, and asks them to refrain from expressing

opinions or voting on such agenda item. • The Board discloses complete data on annual connected transactions in Form 56-1 and the annual

report. A disclosure form for potential conflicts of interest with the Company appears in the Good

Corporate Governance Handbook along with consideration guidelines. Internal Control and Audit • The Board values and institutes processes for business control, particularly financial reporting and

compliance with regulations, rules, and policies. An independent internal audit department is charged

with auditing compliance with the internal control system and reporting to the Audit Committee and

the Board. The Board annually reviews the suitability and adequacy of internal control in five aspects,

namely the control environment, risk assessment, control activities, information and communication,

and monitoring. • At its meeting no. 2/2551 of 22 February 2008, with the Audit Committee in attendance, the Board

reached a consensus that the Company’s internal control was adequate and effective, which would

ensure achievement of the Company’s objectives and goals. The Audit Committee also provided

recommendations to the management for the continuous improvement of the system. Risk Management • The Company has implemented a comprehensive risk management system throughout the entire

organization. The Risk Management Committee, consisting of senior executives, is accountable for

risk management under the policy, and reports its performance to the Audit Committee and the Board

every quarter or when a significant risk or an anomaly arises. To achieve the Company’s business

objectives and goals, it is charged with deliberating the suitability and adequacy against risk

management practices and effectiveness, and keeps informed of warning signals to enable the

Company to achieve its business objectives and goals. (A report on risk management and risk factors

appears on page 79). Board Meetings • The Board fixes meeting dates and times for the year and informs all directors in advance so that

each may schedule their attendance at the meetings. Other extraordinary meetings are scheduled as

needed. If a director cannot attend a meeting, he/she must send an apology letter to the Chairman.

The agenda items are jointly decided by the Chairman and the President. The Company sends

meeting notices with an agenda and support documents to directors so that they may have time to

study them before the meeting – the policy is to have them delivered to directors at least seven days

ahead of each meeting. Each member may also propose matters they consider important, and may

request further information from the President, who serves as Secretary to the Board. The Chairman

should allow sufficient time for management presentations and discussions by the Board. Directors

with potential conflicts of interest must neither attend meetings on their conflicts of interest nor vote

on those issues. • The prepared minutes of each meeting must contain complete significant details, consisting of the

date and time, attending and absent directors, summaries of significant agenda items and

discussions, directors’ observations, resolutions, and views, along with the names of those who

prepared the minutes. Storage of the minutes must be in both hard copies and electronic form for

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convenient search, and a mechanism is in place to prevent minutes amendment without the

acknowledgment of the Board. • The number of Board meetings is compatible with the directors’ performance and the nature of

Company business. Records show individual directors’ attendance at meetings in line with SEC’s

specifications. (Details of Board Meetings and Compensation, page 57). • The management delivers significant documents/information to the Board regularly and encourages

non-executive directors to hold their own meetings in the absence of the management to discuss

concerns and problems of interest. To this end, the Corporate Governance Committee has provided a

practical approach, including meeting before the full Board meeting, to come up with

recommendations or deliberate other matters jointly. Assessment of Board Performance • The Board institutes annual assessment to allow it to review its performance, problems, and obstacles

during the past year. This also lets directors deliberate their dedication while improving relations

between them and the management. The assessment form for 2007 was amended by the Corporate

Governance Committee, reflecting new assessment criteria in line with domestic best practices (SET)

and international best practices (NYSE CG Standard and Combined Code of CG – UK), for greater

efficiency. • Self-assessment forms for directors come in two varieties: individual (including attendance at Board

meetings and shareholders’ meetings) and group (including assessment of participation in designing

policies and implementation, Board performance, subcommittee performance, dedication, and

meeting participation). • In 2007, the Corporate Governance Committee deliberated initial assessment findings and tabled

them for the Board’s consideration and decision on ways to improve collaboration. The Board

considered that both group and individual performances were suitable in aspects such as supervision

and compliance with relevant laws and regulations. In addition, the Board provided useful

recommendations for the Company’s future conduct in line with its prevailing circumstances in

support of the Board’s performance. Remuneration • The Remuneration Committee formulates clear policies and criteria for compensating directors and

tables them before the Board, who then seeks approval from the shareholders. The decision process

for such compensation is transparent and the compensation amounts are approved by the

shareholders. • The compensation structures/components must be fair, suit individual directors’ responsibilities,

reflect the Company’s performance, and must be comparable to those for the industry in which the

Company operates. Each director that also serves as committee members duly receives additional

compensation. • The Board also discloses the types of compensation and the sum given to each director, as well as

compensation for directors and senior executives serving as directors of PTT Chemical subsidiaries

required by position and responsibility in line with stated policies. PTT CHEMICAL PUBLIC COMPANY LIMITED

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Compensation to the President • The Board and the Remuneration Committee jointly decide the assessment criteria for the President. • The Board has assigned the Remuneration Committee to appraise the President and decide on his/her

compensation in line with the assessment findings, which is to be communicated to the President

by the Chairman. (Details about compensation to the Board and the management appear on page

57-58 Board Meetings and Compensation) Development of Directors and the Management • The Board’s policy and means of training for directors are in place for both new and current ones, as well as senior executives appointed to serve as directors of PTT Chemical Group companies. It also regularly disseminates the regulations and practical guidelines of SEC and SET to all of them by the following methods. Incoming directors: Information/knowledge is provided on the roles of directors. In 2007, all these directors underwent IOD directors’ training and received an additional briefing from the Company on its business, as well as meeting with the management team. Each time there is an incoming director, documents/information that would prove helpful to his/her performance is given out. Current directors: Continuing education is provided to these directors through sponsorship of relevant training courses offered by IOD. In 2007, all directors underwent such courses, and participation in more such courses are in the pipeline. Executives: These PTT Chemical Group directors are encouraged to attend directors’ courses at IOD, and to date, more than half of them have done so. Relevant parties in corporate governance: The Company Secretary, the Secretary to the Audit Committee, officers engaged in investor relations, as well as those doing relevant jobs, regularly attend assorted training courses and sit in on seminars on relevant and current topics, and topics that are helpful to their performance organized by SEC, SET, Association of Thai Listed Companies, and IOD. Succession Plan • For the succession and selection of senior executives, the Board defines and deliberates relevant

plans in line with stated plans. An alternative plan is in place in case the President or senior

management cannot perform their duties. This report on our compliance with good corporate governance reflects the Board’s commitment to the Company’s comprehensive compliance with the policy and elements of good corporate governance. Nevertheless, the Board’s responsibility for ensuring and reviewing proper practices in line with evolving circumstances still remains, so that we may foster confidence in an effective, transparent management system that is open to scrutiny and addresses the expectations of the shareholders and stakeholders for the benefit of sustained business value supplementation.

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RISK FACTORS

RISK MANAGEMENT AND RISK FACTORS RISK MANAGEMENT

In a normal course of business operations, PTT Chemical and its affiliates encounter risks, both industrial and company-specific. To enable PTT Chemical to achieve its corporate objectives, the Company establishes a risk management system steered by a risk management committee (RMC), comprising senior executives. An audit committee also provides advice to the RMC regarding the suitability and sufficiency of the Company’s risk management policy and framework. The RMC sets a risk management policy and framework based on the Company’s vision and mission. Appointed personnel are responsible for the management of risks that potentially affect the achievement of the Company’s objectives, including projects and the Company’s subsidiaries and, in certain circumstances, its associates.

RISK FACTORS

PTT Chemical has closely aligned its risk management process with that of a recognized international standard. However, the nature of the petrochemical industry and activities of PTT Chemical Group make it difficult to totally avoid risks. Therefore, certain risks, both industrial and company-specific ones, could have significant impacts on the Group’s operations. 1. INDUSTRIAL RISKS 1.1 Product and Feedstock Price Risks Changes in product and feedstock prices can significantly affect the Group’s operations, as its product and feedstock prices are those of, or formula-linked to, the world markets, which are beyond the Group’s control. Risk Management Approach : PTT Chemical’s policy is to explicitly quote prices of products and feedstock in all transaction contracts that reflect current prices in major markets (US, European and Asian markets) to try to avoid drastic price fluctuations. Where suitable, it follows a policy of basing product and feedstock prices in all transaction contracts on production costs to reduce any adverse effect on the product supplier if the market prices fall below production costs. For example, the price of natural gas, the Company’s major feedstock, reflects those of polymers, its main products. Such policy gives more flexibility to the changes in prices of the end products, and thus lessens the impact of changing prices of products and feedstock, especially during the industry’s down cycle.

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PTT Chemical believes that the capacity expansion in base chemicals, polymers, and ethylene oxide-based products to achieve economies of scale will lower the costs of production per unit and, in turn, alleviate the impacts when prices under a given product are falling. Higher total sales after the capacity expansions would compensate for income lost due to a lower price per unit, especially during the down cycle of a particular product. The Group constantly seeks opportunities to expand into downstream products with high business potential to reduce fluctuation in revenues and in net profits in the long term. Downstream products, such as polymers, usually belong to different price cycles from that of ethylene, a main upstream product of the Company. Expansion into the downstream petrochemicals with high potential and higher value-added lessens the impact of price competition in the long term and gives the Company greater opportunities to venture into innovative products, an essential factor for the sustained growth of the Group. PTT Chemical has established Integrated Net Profit committee responsible for approving and mapping out guidelines and principles for the distribution of ethylene and propylene to each product line to boost efficiency and obtain the highest returns in the management of olefins and also temper the impacts of price fluctuations on feedstock and products. 1.2 Financial Risks Foreign Exchange (FX) Risks Typically, PTT Chemical Group’s revenues and expenses are in US dollars or US dollarlinked, and foreign exchange (FX) risks could therefore affect income in the unhedged portion. For instance, should the Baht strengthen against the dollar, the Company would experience a lower net profit in Baht. This clearly indicates that the currency exchange fluidity, over which the Group has no control, could have a significant impact on the Company’s net profits. Risk Management Approach : The Company manages FX risks by emphasizing natural-hedge management, which seeks a balance between cash inflows and outflows, including capital expenditure, in foreign currencies. Interest Rate Risks PTT Chemical’s policy is to maintain for the Group a net interest-bearing debt-to-equity ratio of up to 1.0 time and a net interest-bearing debt-to-EBITDA ratio of up to 2.0 times to create an optimal return on investment for stakeholders while supporting the Group’s operational and investment plans.

2007 ANNUAL REPORT

Therefore, in maintaining an optimal leverage level, it is necessary to bear interest-rate risks arising from fluctuating and rising interest rates, particularly at the time when the Group intends to secure loans. This may result in higher financing costs, the inability to secure loans, or the necessity of issuing debt securities to the full amount required by the Company and its affiliates. Risk Management Approach : To temper the impacts of fluctuating interest rates and a rate hike when the Company wishes to secure a loan or issue debt securities, PTT Chemical may seek to increase its short-term and medium-term credit lines. The Company may use financial instruments where necessary to minimize a negative impact when the financial market is in a state of flux. The Company may also plan to arrange the term and required amount of loans or debt securities to synchronize with the prevailing financial situation and interest rate outlook for a given period. 2. COMPANY-SPECIFIC RISKS 2.1 Conflicts of Interests Risks Siam Cement PLC is a major shareholder of PTT Chemical (with 19.05 percent), with subsidiaries producing olefins, HDPE, LDPE, and LLDPE, similar to PTT Chemical Group (both in operational and planning stages). One of Siam Cement’s subsidiaries takes delivery of about a fifth of the total ethylene produced by PTT Chemical, thus presenting a potential conflict of interests between the Group and Siam Cement because this may reduce the Company’s capability to maximize its profits. By the same token, PTT PLC, the largest shareholder, with 48.78 percent shares, is the major supplier of feedstock required by PTT Chemical, supplying about three-quarters of PTT Chemical’s total required feedstock. Risk Management Approach : PTT Chemical not only observes a recognized good corporate governance policy and principles but stresses their importance and the implementation at all levels of the Group’s operations. In addition, it has always observed the principle of conducting its business under the highest ethical standards. These principles are expected and required to be implemented by board members, executives, management, supervisors, employees, and contractor employees, all of whom must acknowledge and follow the policies and guidelines set forth in the Company’s Good Corporate Governance Handbook. This includes guidelines for transactions with shareholders, subsidiaries, or associates of shareholders, directors, or the management of PTT Chemical. The guidelines also include the practice of engaging in connected transactions, which prohibits concerned parties from voting on agendas of interests during a meeting of the board or the shareholders. PTT Chemical is fully committed to abiding by the rules and regulations of the Securities and Securities Exchange of Thailand Act of 1992 by appointing an independent committee (or sub-committee) and audit committee to safeguard the interests of minor shareholders and ensure fair treatment for all stakeholders.

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2.2 Human Resource Risks The Group is expanding its business further downstream, including derivatives, to many projects. After their commercial operation, the configuration and running of plants and machinery, as well as product planning and sales management, may differ radically from the present. Current personnel of the Group may lack skills or experience in carrying out new modes of operation efficiently, at the standard level, or at a competitive level. Alternatively, the Group may be unable to recruit external personnel with the required skills and experience. In the worst case, such shortage could pose severe risks that hurt the Group’s operation significantly. Risk Management Approach : The Group has recognized these risks all along ever since its contemplation of project operation and preparation of skilled and experienced people for assorted projects. To cope with this problem, the Group has decided on the use of shared services among its business units since 1 February 2008, whereby actions will be taken to upgrade its personnel’s capability and prepare training plans in line with personnel competency gaps and the Group’s strategic implementation. The Company is convinced that such actions will not only add efficiency to the management and human resource development of the Group, but also align with the need for human resources of ongoing projects. On the whole, this would somewhat alleviate such human resource risks. 2.3 Plant Operation Risks In operating petrochemical plants, some potential occurrences from within and outside the Group can unexpectedly cause disruption of plant operation. Human errors, accidents, insufficient or undeliverable utilities (electricity, water, steam, etc.), machinery failures and operational failures of feedstock supply, or customer-related occurrences could lead to an interruption in production with possible significant impacts on the Company’s or the Group’s financial performance. Risk Management Approach : Aware of these operational risks, PTT Chemical Group has established business interruption plans for controlling emergency incidents, minimizing losses and safeguarding personnel and the environment. Furthermore, the Group has scheduled preventive and predictive maintenance procedures to minimize machinery risks. It has also established procedures and manuals for machinery maintenance to minimize errors, accidents, and disruptions. Finally, the Company and its affiliates have an all-risk insurance policy to compensate for and minimize financial losses from such occurrences.

2007 ANNUAL REPORT

2.4 Project Risks PTT Chemical Group is expanding current and new product lines of upstream and downstream petrochemicals, including production and services in support businesses like utilities, jetties, and other support functions. Most projects, some of which are in the design or construction phase, are related to one another in the supply of feedstock and offtaking products, or in the transfer of electricity and steam between product lines and utilities. The Group inevitably encounters assorted project risks, some of which could have considerable impacts on the projects themselves and ultimately on the Company or the Group. As project risks may result from feedstock supply or may be related to the environment, engineering design, procurement, construction, execution, markets, and logistical risks, these risks may cause project delays, cost overruns, or project viability, among others. Risk Management Approach : Aware of these project risks, PTT Chemical assigns a risk owner, i.e., project owner, to be responsible for project risk management under the Company’s risk management policy and framework. The processes include identification of project risks, assessment of impacts and likelihood of occurrences of the relevant risks, formulation and implementation of risk management plans, and continual reporting and reviewing of a risk report. The Company believes that its systematic risk management will encourage risk owners, the management of the Company and its affiliates, and other relevant parties to become more aware of the risks encountered by concerned projects, while recognizing the importance of the risk management of a project as well as that of the Group as a whole. With project risk management in place, the possibility of a risk is reduced and/or the project owners will be better prepared should a risk occur. This also means that a direct loss or a loss of business opportunities would be proportionally less, enabling the Group to achieve its growth targets in the medium term and long term. On the whole, project risk management by the Group focuses on minimizing the likelihood of project delays and keeping project costs under the budget. Moreover, the Company and its affiliates command a construction all-risk insurance policy covering projects under construction, which would compensate the Company and its affiliates for financial losses if severe project risks were to occur. 2.5 Cluster-of-Plants Risk PTT Chemical Group’s plants are located at or around Map Ta Phut Industrial Estate and so are its major feedstock suppliers and principal customers. Therefore, serious damage or losses to the Group’s production facilities, its major suppliers, customers, or the pipeline system could have severe impacts on the Company’s or its affiliates’ performance.

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Risk Management Approach : To reduce the impacts of such mishaps, the Group has arranged an all-risk insurance policy for projects with commercial operation, and a construction all-risk insurance policy for relevant projects under internationally accepted standards. 2.6 Risks of Having a Large Supplier & Customer PTT Chemical procures about three-quarters of its total required feedstock from PTT PLC and supplies about a fifth of its ethylene production to one company, therefore bearing a risk in having a large feedstock supplier and customer for its main product, as this supplier or customer change its policies of supplying feedstock or offtaking product in future. Risk Management Approach : Such risks are considered limited, as the major supplier is also the Companyâ&#x20AC;&#x2122;s major shareholder, while the large ethylene customer is a subsidiary of its second-largest shareholder. In addition, the purchase of feedstock and sales of ethylene are mostly arranged under long-term agreements, in which price formulas are of the normal course of business. The very nature of the petrochemical industry itself limits the ability of the feedstock supplier to obtain a new customer and for the ethylene customer to find a reliable supplier. There is therefore only an insignificant possibility that either this feedstock supplier or this ethylene customer would break its contracts with short notice. Consequently, the Company bears only a limited risk by having a large feedstock supplier and ethylene customer.

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Connected Transactions

TRANSACTIONS WITH SHAREHOLDERS AND RELATED COMPANIES

As of 31 December 2007, some significant business transactions had taken place between the Company and its shareholders and related companies of common shareholders or directors. Mainly concerning product and service transactions, these transactions were based on market or contractual prices. Below are the details. Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical

PTT CHEMICAL PUBLIC COMPANY LIMITED

PTT PLC (PTT) Petrochemical business operation & support • Major shareholder with 49.33% shares • Common directors: 1. Mr. Prasert Bunsumpun 2. Mr. Olarn Chaipravat • Sales transactions of products and services HMC Polymers Co., Ltd. (HMC) Manufacture & sale of PP • Holds 2.82% shares in PTTCH • Common directors: 1. Mr. Prajya Phinyawat 2. Mr. Pichit Nithivasin • Sales transactions of products and services Thai Plastic and Chemicals PLC (TPC) Manufacture & sale of PVC • Holds 0.64% shares in PTTCH • Common director: Mr. Cholanat Yanaranop • Sales transactions of products and services Thai Polyethylene Co., Ltd. (TPE) Manufacture & sale of PE • TPE’s major shareholder (Siam Cement) is also a major shareholder of PTTCH • Common directors: 1. Mr. Cholanat Yanaranop 2. Mr. Roongrote Rangsiyopash • Sales transactions of products and services 085

Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical

086

Thai Polypropylene Co., Ltd. (TPP) Manufacture & sale of PP • TPP’s major shareholder (Siam Cement) is also a major shareholder of PTTCH • Common directors: 1. Mr. Cholanat Yanaranop 2. Mr. Roongrote Rangsiyopash • Sales transactions of products and services PTT Aromatics and Refining PLC (PTTAR) Manufacture & sale of benzene, toluene, paraxylene, orthoxylene, and mixed xylenes, and oil refinery business • PTTAR’s major shareholder (PTT) is also a major shareholder of PTTCH • Common directors: 1. Mr. Pornchai Rujiprapa 2. Mr. Prasert Bunsumpun 3. Mr. Pala Sookawesh 4. Mr. Prajya Phinyawat 5. Mr. Pichai Chunhavajira • Sales transactions of feedstock, products, and services Rayong Olefins Co., Ltd. (ROC) Petrochemical business • ROC’s major shareholder (Siam Cement) is also a major shareholder of PTTCH • Common directors: 1. Mr. Cholanat Yanaranop 2. Mr. Roongrote Rangsiyopash 3. Mr. Pichit Nithivasin • Service transactions Siam Styrene Monomer Co., Ltd. (SSMC) Manufacture of styrene monomers • SSMC’s major shareholder (Siam Cement) is also a major shareholder of PTTCH • Common directors: 1. Mr. Cholanat Yanaranop 2. Mr. Roongrote Rangsiyopash • Sales transactions of products and services 2007 ANNUAL REPORT

PTT CHEMICAL PUBLIC COMPANY LIMITED

Siam Mitsui PTA Co., Ltd. Manufacture of purified terephthalic acid • Siam Mitsui’s major shareholder (Siam Cement) is also a major shareholder of PTTCH • Common director: Mr. Cholanat Yanaranop • Service transactions with PTTCH’s subsidiary Pacific Plastics (Thailand) Co., Ltd. Manufacture of PS • Pacific Plastics’s major shareholder (Siam Cement) is also a major shareholder of PTTCH • Common director: Mr. Cholanat Yanaranop • Service transactions with PTTCH’s subsidiary Thai Tank Terminal Ltd. (TTT) Storage and transport services for liquid chemicals, oil, and gas at Map Ta Phut Industrial Estate • A subsidiary of PTTCH (51% shares) • Common director: Mr. Aditheb Bisalbutr • Three TTT directors are PTTCH executives: 1. Mr. Sahaschai Panichapong 2. Mrs. Puntip Oungpasuk 3. Mr. Narong Bunditkamol • Sales transactions of products and services NPTC Maintenance and Engineering Services Co., Ltd. (NPTC) Maintenance and engineering services, etc. (domestic and Asia) • A subsidiary of PTTCH (60% shares) • Two NPTC directors are PTTCH executives: 1. Mr. Athavudhi Hirunburana 2. Mr. Jiamsak Nantananate • Service transactions NPC Safety and Environmental Service Co., Ltd. (NPC S&E) Safety and environment services for network government agencies and private companies • A wholly-owned subsidiary of PTTCH • Five NPC S&E directors are PTTCH executives: 1. Mr. Sahaschai Panichapong 2. Mr. Jiamsak Nantananate 3. Mr. Narong Bunditkamol 4. Mr. Veerasak Kositpaisal 5. Mr. Suvit Tinnachote • Service transactions 087

Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical

088

PTT Utility Co., Ltd. (PTTUT) Production and sale of electricity, steam, and water for production processes • A PTTCH associate with 40% shares • PTTUT’s major shareholder (PTT) is also a major shareholder of PTTCH • Four PTTUT directors are PTTCH executives: 1. Mr. Athavudhi Hirunburana 2. Mr. Sahaschai Panichapong 3. Mr. Dhanes Charoensupaya 4. Mr. Narong Bunditkamol PTT Polyethylene Co., Ltd. (PTTPE) Manufacture of olefins and derivatives • A wholly-owned subsidiary of PTTCH • Common director: Mr. Prajya Phinyawat • Four PTTPE directors are PTTCH executives: 1. Ms. Panada Kanokwat 2. Mr. Khubbhol Suksupha 3. Mr. Veerasak Kositpaisal 4. Mrs. Puntip Oungpasuk PTT Phenol Co., Ltd. (PPCL) Manufacture of phenol and by-products • A PTTCH associate with 30% shares • PPCL’s major shareholder (PTT) is also a major shareholder of PTTCH • Common director: Mr. Prajya Phinyawat • Three PPCL directors are PTTCH executives: 1. Mrs. Puntip Oungpasuk 2. Mr. Sahaschai Panichapong 3. Mr. Dhanes Charoensupaya PTT Polymer Marketing Co., Ltd. (PTTPM) Marketing and distribution of polymer products for PTT Group • A PTTCH associate with 25% shares • PTTPM’s major shareholder (PTT) is also a major shareholder of PTTCH • Common director: Mr. Prajya Phinyawat • Two PTTPM directors are PTTCH executives: 1. Mr. Veerasak Kositpaisal 2. Mrs. Punthip Oungpasuk • Sales transactions of products 2007 ANNUAL REPORT

Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical

PTT CHEMICAL PUBLIC COMPANY LIMITED

Star Petroleum Refining Co., Ltd. (SPRC) Oil refinery business • SPRC’s major shareholder (PTT) is also a major shareholder of PTTCH • Common director: Mr. Prajya Phinyawat • Sales transactions of feedstock and products Vinythai PLC (VNT) Manufacture & sale of PVC • PTTCH holds 24.98% shares • Common directors: 1. Mr. Tongchat Hongladaromp 2. Mr. Aditheb Bisalbutr • Two VNT directors are PTTCH executives: 1. Mr. Sahaschai Panichapong 2. Mrs. Puntip Oungpasuk • Sales transactions of products IRPC PLC (IRPC) Petrochemical business • IRPC’s major shareholder (PTT) is also a major shareholder of PTTCH • Common directors: 1. Mr. Prasert Bunsumpun 2. Mr. Pala Sookawesh 3. Mr. Prajya Phinyawat • Sales transactions of products Bangkok Polyethylene PLC (BPE) Manufacture & sale of HDPE • A wholly-owned subsidiary of PTTCH • Common directors: 1. Mr. Pala Sookawesh 2. Mr. Prajya Phinyawat 3. Mr. Tongchat Hongladaromp • Two BPE directors are PTTCH executives: 1. Ms. Panada Kanokwat 2. Mr. Veerasak Kositpaisal • Sales and purchases of products

089

Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical Company Business Relationship with PTT Chemical

090

Bangkok Synthetics Co., Ltd. (BST) Manufacture & sale of mixed-C4s derivatives • BST has 1.47% shares in PTTCH • Common directors: 1. Mr. Pichit Nithivasin 2. Mr. Cholanat Yanaranop • Service transactions Bangkok Industrial Gas Co., Ltd. (BIG) Manufacture & Sale of industrial gases • Common director: Mr. Pichit Nithivasin • Sales transactions of products and services Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) Fuel pipeline transport services • THAPPLINE’s major shareholder (PTT) is also a major shareholder of PTTCH • Common director: Mr. Pichai Chunhavajira • Service transactions Eastern Fluid Transport Co., Ltd. (EFT) Pipeline and transport services • A PTTCH associate with 22.65% shares • One EFT Director is PTTCH executive: Mr. Athavudhi Hirunburana • Service transactions with PTTCH’s subsidiary Dhipaya Insurance PLC (DHIPAYA) Insurance business • DHIPAYA’s major shareholder (PTT) is also a major shareholder of PTTCH • Common director: Mr. Pichai Chunhavajira • Connected transactions TOC Glycol Co., Ltd. (TOCGC) Manufacture & sale of MEG • A wholly-owned subsidiary of PTTCH • Common director: Mr. Aditheb Bisalbutr • Four TOCGC directors are PTTCH executives: 1. Ms. Panada Kanokwat 2. Mrs. Puntip Oungpasuk 3. Mr. Athavudhi Hirunburana 4. Mr. Suvit Tinnachote 2007 ANNUAL REPORT

PTT CHEMICAL PUBLIC COMPANY LIMITED

Thai Ethoxylate Co., Ltd. (TEX) Manufacture & sale of fatty alcohol ethoxylates, base chemical of personal healthcare products • A PTTCH associate with 50% shares Thai Ethanolamines Co., Ltd. (TEA) Manufacture & sale of ethanolamines and products for paint, pharmaceutical, cosmetics, cement, etc. • A wholly-owned subsidiary of PTTCH • Common director: Mr. Aditheb Bisalbutr • Three TEA directors are PTTCH executives: 1. Mr. Athavudhi Hirunburana 2. Ms. Panada Kanokwat 3. Mr. Suvit Tinnachote Thai Choline Chloride Co., Ltd. (TCC) Manufacture & sale of choline chloride • A wholly-owned subsidiary of PTTCH • Four TCC directors are PTTCH executives: 1. Mr. Jiamsak Nantananate 2. Mr. Athavudhi Hirunburana 3. Ms. Panada Kanokwat 4. Mr. Suvit Tinnachote Thai Oleochemicals Co., Ltd. (TOL) Manufacture & sale of methyl ester, fatty alcohols, and glycerine • A wholly-owned subsidiary of PTTCH • Common directors: 1. Mr. Pala Sookawesh 2. Mr. Aditheb Bisalbutr • Two TOL directors are PTTCH executives: 1. Mr. Sahaschai Panichapong 2. Mrs. Puntip Oungpasuk Alliance Petrochemical Investment (Singapore) Pte. (API) Investment in HDPE project in Iran • PTTCH holds 16.67% shares • One API director is PTTCH executive: Mr. Dhanes Charoensupaya Vopak Holding International B.V. Logistics of chemical and oil products from manufacturers to consumers • Vopak hold 49% shares in Thai Tank Terminal Limited, a PTTCH subsidiary • Sales transactions of services with Company subsidiary 091

Thai Industrial Gases PLC (TIG) Manufacture & sale of industrial gases • Common director: Mr. Paibulya Punyavutti • Sales transactions of products and services PTT ICT Solutions Co., Ltd. (PTTICT) Services for information communication and technology to PTT Group • A PTTCH associate with 20% shares • Common director: Mr. Athavudhi Hirunburana • Service transactions PTT Polymers Logistic Co., Ltd. (PTTPL) Logistics services to PTT Group’s petrochemical businesses • PTTPL’s major shareholder (PTT) is also PTTCH’s major shareholder • Common director: Mr. Prajya Phinyawat • One PTTPL director is PTTCH executive: Mr. Khubbhol Suksupha Thai Fatty Alcohol Co., Ltd. (TFA) Manufacture & sale of oleochemicals, fatty alcohols, and derivatives • A PTTCH subsidiary associate with 50% shares • Common director: Mr. Tongchat Hongladaromp Cognis Thai Co., Ltd. Manufacture of oleochemicals and petrochemical derivatives • Holds 50% shares in a PTTCH joint venture Cognis Oleochemicals (M) Sdn. Bhd. Manufacture of oleochemicals, fatty alcohols, and all its derivatives • Its major shareholder (Cognis German) wholly owns Cognis Thai Co., Ltd. PTTEP PLC (PTTEP) Petroleum exploration and production • PTTEP’s major shareholder (PTT) is also a major shareholder of PTTCH • Common directors: 1. Mr. Cherdpong Siriwit 2. Mr. Prasert Bunsumpun 3. Mr. Tongchat Hongladaromp 4. Mr. Pala Sookawesh 5. Mr. Pichai Chunhavajira TPC PET Resin Co., Ltd. Manufacture of PVC resin in the form of powder and polymers, feedstock for plastics • Its major shareholder (Siam Cement) is also a major shareholder of TPC, which wholly owns TPC PET Resin

2007 ANNUAL REPORT

TRANSACTIONS WITH CONNECTED PARTIES

For 2006 and 2007, details of the Company’s transactions with connected parties appear in the top pro forma financial statements as of year-end 2007 and 2006, item 6.

NEEDS AND JUSTIFICATION OF CONNECTED TRANSACTIONS

Sales of products by PTT Chemical to related companies have been carried out mainly so that they may convert its products into their own for sale at prices corresponding to long-term offtake agreements or spot prices. Prices must prove reasonable to both parties and be based on market prices without any undue transfer of interests. When providing services to related companies, transactions must cover transportation or storage costs of products. The charge for services is both market-based and benefit– based, without any transfer of interests. Product and feedstock supplies and/or services as well as the volume of products, feedstock or services given by related companies must meet the needs and business operation of PTT Chemical. Prices of product trading or services are as agreed by the Company and related companies without any transfer of interests. In addition, the Company is required to purchase feedstock for producing ethylene, propylene, and other by-products from related companies because the capacity and quality of such feedstock meet its needs. PTT Chemical also saves transportation expenses since feedstock bought from related companies can be transferred safely by the Company’s pipeline system from their plants in Map Ta Phut Industrial Estate, Rayong.

MEASURES AND PROCEDURES FOR APPROVAL OF CONNECTED TRANSACTIONS

Company regulations state that a director can acquire or dispose of company assets or perform any business transaction involving the Company either by himself or herself or on behalf of others only with the approval of the Board. Any director who personally gains from any acquisition or disposal of company assets or any transaction of the Company is not allowed to vote on that matter. After securing approval from the Board, the Company can perform any business transaction or acquire or dispose of major assets in line with a regulations of the Stock Exchange of Thailand (SET). This also applies to the Company’s subsidiaries in the SET announcement concerning connected transactions of registered companies as well as the buying or selling of registered company assets.

OPINION OF INDEPENDENT DIRECTORS

The Company’s independent directors noted that the connected transactions complied with the requirements of the Board.

PTT CHEMICAL PUBLIC COMPANY LIMITED

093

POLICIES AND TRENDS OF FUTURE CONNECTED TRANSACTIONS

Future connected transactions between the Company and related companies will remain normal and unexceptional without any transfer of interests. Pricing between them will be implemented at arm’s length. Moreover, the prices of products or feedstock purchased from related companies will be set in agreements or linked to market prices. In addition, service charges paid to related companies will also be at arm’s length. The prices of products sold or purchased between the Company and related companies wil , as a rule, be linked to the Map Ta Phut market prices. Disclosure of the Company’s connected transactions is to comply with the rules and regulations of the Securities and Exchange Commission (SEC) and SET. The audit standards for related parties will be as specified by the Federation of Accounting Professions and Office of the Auditor-General.

094

2007 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCIAL RESULT FOR THE YEAR 2007

PTT Chemical Public Company Limited (“the Company” or “PTTCH”) and its subsidiaries.

1. EXECUTIVE SUMMARY

PTT Chemical Public Company Limited (“the Company” or “PTTCH”) has acknowledged the change of the accounting treatment of the Company’s investments in subsidiaries and associates from “Equity Method” to “Cost Method” for its separate financial statements since January 1, 2007, which required retrospective adjustments for 2006 financial statement. Nevertheless, this accounting change has only affected the Company’s separate financial statements, and has not had any effect on the Company’s consolidated financial statements. In addition, the Company has also acknowledged the change of asset revaluation from “Revaluation Method” to “Historical Cost”, which has affected and required retrospective adjustments for the Company’s consolidated and separate financial statements of the year 2006. In 2007, PTT Chemical Public Company Limited (“the Company” or “PTTCH”) and its subsidiaries reported net profits of Baht 19,167 million, or Baht 12.85 per share, up 6% comparing to the same period last year of Baht 18,282 million or Baht 15.75 per share. The operating results can be summarized as follows: Comparing 2007 and 2006 operating results (Restated)

(Unit : Mil ion Baht)

2007

Sales 73,870* EBITDA** 25,343 Net Profit 19,167 Basic Earning 12.85 Per Share (Baht)

Note :

2006

69,811* 23,789 18,282 15.75***

% Change

6% 6% 5% (18%)

* Included MEG sales (TOCGC) of Baht 13,423 mil ion in 2007 and Baht 3,676 mil ion in 2006. ** Earnings before depreciation and amortization, tax, and interest income and expenses. *** Earning per share before restated financial statement was Baht 14.91.

The increase in net profits in 2007 comparing to 2006 was due mainly to an increase in product price, which MEG was the product that contributed the highest margin.

1. HDPE (SEA-Spot) average price increased from 1,233 USD/ton to 1,352 USD/ton or up 10%. The benchmark naphtha feedstock (MOPS) also increased from 556 USD/ton to 677 USD/ton or up 20%. This resulted in a sustainable spread margin (HDPE over Naphtha) in 2006 and 2007 at approximately 676 USD/ton. However, our main feedstock is gas which its price is less volatile than naphtha price PTT CHEMICAL PUBLIC COMPANY LIMITED

095

(naphtha price is relatively linked to crude oil price). Thus, the increase in the Company’s feedstock cost was slower than that of the naphtha cost. (In 2007 the Company’s feedstock was 78% gas while in 2006 was 74% gas). 2. The MEG price (SEA Contract) increased from 910 USD/ton to 1,126 USD/ton or up 24% due to a constraint supply from the shutdown of MEG plant in Saudi Arabia since July 2007. The benchmark naphtha feedstock (MOPS) also increased from 556 USD/ton to 677 USD/ton or up 20%. However, the rise in feedstock cost was lower than that of the product price, which resulted in higher spread margin (MEG over Naphtha) of 449 USD/ton in 2007 compared to 354 USD/ton in 2006. However, our main feedstock is gas which its price is less volatile than naphtha price (naphtha price is relatively linked to crude oil price). Thus, the Company’s spread margin (MEG over gas) was higher than spread margin of MEG over Naphtha. In addition, the production and sales volumes of MEG also sharply increased. In 2007, the MEG production volumes were 313,883 tons, up from 2006 at 152,585 tons or 106% (TOCGC has started its commercial operation since 14 August 2006), and sales volumes increased from 105,434 tons to 342,748 tons or up 225%. With an improving net profit; however, the Company’s earning per share dropped from that of the same period last year from Baht 15.75 to Baht 12.85 due to the Company’s right offering for existing shareholders in late 2006 and the exercise of warrant issued in 2006 under ESOP scheme on 28 September 2007 and 28 December 2007, totaling 6,456,300 shares. Comparing 4Q/2007 and 3Q/2007 operating results (Unit : Mil ion Baht)

4Q/2007

% Change

4Q/2006

Sales 24,788* 20,422* 21% EBITDA** 9,921 6,960 43% Net Profit 8,008 5,281 52% Basic Earning 5.35 3.54*** 51% Per Share (Baht)

Note : * Included MEG sales (TOCGC) of Baht 5,667 million in 4Q and Baht 3,052 million in 3Q. ** Earnings before depreciation and amortization, tax, and interest income and expenses *** Earning per share before restated financial statement was Baht 3.38

The increase in net profits in 4Q/2007 comparing to 3Q/2007 was due mainly to an increase in product price and sales volumes, which details are as follows: 1. Ethylene (MTP) price increased from 1,169 USD/ton to 1,243 USD/ton or up 6% while sales volumes improved from 249,636 tons to 279,093 tons or up 12%. The benchmark naphtha feedstock (MOPS) also rose from 665 USD/ton to 796 USD/ton or up 20%, which resulted in 4Q/2007 margins Ethylene (MTP) over Naphtha (MOPS) of 447 USD/ton, dropping from 3Q/2007 at 504 USD/ton. Nevertheless, the Company main feedstock is gas which its price is less volatile than naphtha price (naphtha price is relatively linked to crude oil price). Thus, the increase in the Company’s feedstock cost was slower than that of the naphtha cost. (In 4Q/2007 the Company’s feedstock was 85% gas while in 2006 was 75% gas). 096

2007 ANNUAL REPORT

2. HDPE price (SEA-Spot) rose from 1,383 USD/ton to 1,462 USD/ton or up 6% while sales volumes increased from 136,679 tons to 139,363 tons or up 2%. The benchmark naphtha feedstock (MOPS) also rose from 665 USD/ton to 796 USD/ton or up 20%, which resulted in 4Q/2007 margins (HDPE (SEA) over Naphtha (MOPS) of 666 USD/ton, dropping from 3Q/2007 at 718 USD/ton. Nevertheless, the Company main feedstock is gas which its price is less volatile than naphtha price (naphtha price is relatively linked to crude oil price). Thus, the increase in the Company’s feedstock cost was slower than that of the naphtha cost. 3. MEG price (SEA-Contract) rose from 1,101 USD/ton to 1,499 USD/ton or up 36% while sales volumes were up from 83,325 tons to 109,317 tons, or up 31%. The benchmark naphtha feedstock (MOPS) also rose from 665 USD/ton to 796 USD/ton or up 20%, However, the rise in feedstock cost was lower than that of the product price, which resulted in higher spread margin (MEG over Naphtha) of 702 USD/ton in 4Q/2007 compared to 436 USD/ton in 3Q/2007. However, our main feedstock is gas which its price is less volatile than naphtha price (naphtha price is relatively linked to crude oil price). Thus, the Company’s spread margin (MEG over gas) was higher than spread margin of MEG over Naphtha. To enhance the Company’s competitiveness in petrochemical business and the Company’s sustainable long-term growth, and to stabilize the overall margins, which are related to the Company’s main strategy, the Company has implemented several investment projects. The investments are shown below: 1) To Enhance the Competitiveness PROJECT DESCRIPTION PROGRESS OPERATION START UP DATE 1.1 De-bottlenecking To expand ethylene Under equipment 4Q/2008 Project (Plant I4-2) capacity by 100,000 installation tons per year and propylene by 50,000 tons per year 1.2 Ethane Cracker An ethylene plant with under construction 4Q/2009 Project under PTT capacity of 1,000,000 phase Polyethylene Co., Ltd. tons per year, which (PTTPE) holding 100% 1,344,000 ethane will by PTTCH be provided by PTT.

PTT CHEMICAL PUBLIC COMPANY LIMITED

097

2) To integrate into downstream businesses and related businesses to diversify the investment risks POLYMERS PROJECT DESCRIPTION PROGRESS OPERATION START UP DATE 2.1 HDPE Expansion To expand HDPE During selecting 1Q/2009 under PTT Chemical capacity from EPC contractor PLC 250,000 tons per year to 300,000 tons per year Awarded EPC 4Q/2009 2.2 HDPE Expansion To expand HDPE under Bangkok capacity from 250,000 contractors Polyethylene PLC (BPE) tons per year to 500,000 tons per year 2.3 LLDPE and LDPE An LLDPE plant with under construction 4Q/2009 project under PTT capacity of 400,000 phase Polyethylene Co., Ltd. tons per year and LDPE (PTTPE) holding 100% plant with capacity of by PTTCH 300,000 tons per year PERFORMACE PRODUCTS PROJECT DESCRIPTION PROGRESS OPERATION START UP DATE 2.4 MEG Expansion To increase EO/EG under construction 4Q/2008 Project under TOC capacity of 95,000 phase Glycol Co., Ltd. tons per year (TOCGC) holding 100% by PTTCH 2.5 Phenol projects A phenol plant with under construction 3Q/2008 under PTT Phenol capacity of 200,000 phase Co., Ltd. (PPCL) tons per year holding 30% by PTTCH 2.6 Ethanolamines An ethanolamines plant under construction 4Q/2008 Project under Thai with capacity of 50,000 phase Ethanolamines Co., Ltd. tons per year (TEA) holding 100% by PTTCH 2.7 Choline Chloride A choline chloride plant During Basic 2Q/2009 Project under Thai Choline with capacity of 20,000 Engineering Chloride Co., Ltd. (TCC) tons per year holding 100% by PTTCH 098

2007 ANNUAL REPORT

OLEOCHEMICALS

PROJECT DESCRIPTION PROGRESS 2.8 Methyl Ester/ A plant with total - Methyl Ester: Started Fatty Alcohols Project capacity of 331,000 commercial operation under Thai tons per year on December 2006. Oleochemicals Co., Ltd. - Methyl Ester 200,000 - Fatty Alcohols: Under (TOL) holding 100% tons per year construction phase by PTTCH - Fatty Alcohols 100,000 tons per year - Glycerine 31,000 tons per year UTILITY, JETTY & SUPPORT PROJECT DESCRIPTION PROGRESS 2.9 The Central utilities To produce and sell the fourth phase is project under PTT Utility electricity, steam and under construction Co., Ltd. (PTTUT) industrial water at holding 40% by PTTCH Map Ta Phut Industrial Estate

OPERATION START UP DATE

Fatty Alcohols Q1/2008

OPERATION START UP DATE

The fourth phase will start commercial operation in 4Q/2008.

2. INDUSTRY OVERVIEW

Product price, feed stock price and product to feed margins. Feedstock Unit :

MOPS

Ethylene SEA

MTP

Propylene SEA

MTP

$/MT

Q1 2006 Q2 2006 Q3 2006 Q4 2006 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 2007

520 591 590 521 556 574 672 665 796 677

PTT CHEMICAL PUBLIC COMPANY LIMITED

1,045 1,118 1,304 1,158 1,156 1,222 1,140 1,203 1,156 1,180

1,045 1,071 1,192 1,085 1,099 1,065 1,081 1,169 1,243 1,139

1,006 1,081 1,254 1,157 1,124 1,182 1,142 1,129 1,164 1,154

981 1,073 1,149 1,064 1,067 1,084 1,140 1,167 1,245 1,159

Derivatives

Spread

HDPE

MEG

(FILM)

SEA

MTP -

HDPE -

MEG -

SEA

Cont.

MOPS

525 480 602 564 543 491 409 504 447 463

460 482 558 543 511 510 468 502 448 482

593 609 757 749 677 692 627 718 666 676

363 272 369 413 354 355 303 436 702 449

1,114 883 1,200 863 1,348 960 1,270 934 1,233 910 1,266 929 1,300 976 1,383 1,101 1,462 1,499 1,352 1,126

Ethylene Propylene

099

3. FINANCIAL RESULTS

2007

2006

Sales Revenues 73,870 Feedstock Cost (41,328) Gross Margin 32,542 Processing Cost (7,167) Other Revenue 2,015 S&A Expenses (2,047) EBITDA* 25,343 Depre.&Amort. (3,561) EBIT 21,782 Financing Expense (161) FX Gain (Loss) 210 Share of Gain from Investment 27 Less Earning Attributable to Minority Interest (403) Corporate Tax (2,288) Net Profits 19,167 EPS (Bt./Sh.) 12.85

(Restated)

(Unit : Mil ion Baht)

Note:

69,811 (40,692) 29,119 (5,966) 2,327 (1,692) 23,789 (2,542)** 21,247 (637) 1,073 109 (385) (3,125) 18,282 15.75

% Change

6% 2% 12% 20% (13%) 21% 7% 40% 3% (75%) (80%) (75%) 5% (27%) 5% (18%)

* Earnings before depreciation and amortization, tax, and interest income and expenses ** down from Baht 3,779 million before restated financial statement

The companyâ&#x20AC;&#x2122;s sales revenues were reported at Baht 73,870 million, up from that of 2006 at Baht 69,811 million or up 6% due to an increase in product prices; HDPE (SEA) price rose 10% while MEG price was up by 24%. In addition, production and sales volumes of MEG by TOCGC sharply increased from those of 2006, in which production volumes rose by 106% and sales volumes rose by 225% due to the full year operation of TOCGC in 2007. (TOCGC has started its commercial operation since 14 August 2006.) The Company reported gross margin of Baht 32,542 million, up 12% from last year due to higher production and sales volumes. Moreover, spread margins of MEG rose from 354 USD/ton to 449 USD/ ton or up 27% while that of HDPE remained stable at 676 USD/ton when compared to 2006. Processing cost was Baht 7,167 million, up 20% due to the consolidation of BPE after the Company has acquired 100% of its shares since 4Q/2006 and the consolidation of TOCGC and TEX, which started their commercial operation in August and October 2006 respectively. Selling and administrative expenses were Baht 2,047 million, up 21% due mainly to an increase in S&A of BPE, TEX and TOL. (TOL has started its Methyl Ester unit since 4Q/2007). EBITDA was Baht 25,343 million, up 7% while net profit was Baht 19,167 million, up 5% due mainly to an increase in production and sales volumes of HDPE and MEG. 100

2007 ANNUAL REPORT

Depreciation and Amortization was Baht 3,561 million, up 40% due to a rise in depreciation of I4-1 De-bottlenecking assets and depreciation of BPE and TOCGC, which the Company has consolidated to the financial statements since 4Q/2006. Financing expenses (Interest Income-Interest Expense) was Baht 161 million, down 75% due mainly to an increase in interest income from deposits. (The Company’s interest income in 2006 and 2007 was reported at Baht 502 million and Baht 989 million respectively while interest expenses in 2006 and 2007 was recorded at Baht 1,137 million and Baht 1,150 million respectively.) Gain from foreign currency exchange rate was Baht 210 million, down 80% due mainly to the foreign exchange loss from forward contract in subsidiaries. Income tax was Baht 2,288 million, down 27% due mainly to TOCGC tax privilege received from BOI, which resulted in an effective tax rate of 12% in 2007, down from 17% in 2006. Basic earning per share is Baht 12.85, down 18% due to the Company’s right offering for existing shareholders in late 2006 and the exercise of warrant issued in 2006 under ESOP scheme on 28 September 2007 and 28 December 2007, totaling 6,456,300 shares.

4. PRODUCTION EFFICIENCIES

In 2007, the ethylene production volumes were 1,102,416 tons and the propylene were 347,876 tons, down from last year at 8% and 11% respectively. This was due to, in 1H/2007, the planned shutdown of I4-1 olefins plant for capacity expansion and maintenance (Debottleneck 1) for 67 days, the planned shutdown of olefins plant I4-2 for checking and inspection of its equipment and maintenance during the warranty period for 40 days, the planned shutdown of Oleflex unit of olefins plant I1 for inspection and maintenance for 22 days, and the unplanned shutdown of olefins plant I1 for equipment maintenance for 46 days in 1H/2006. In 2007, HDPE production volumes from olefins plant I1 were 257,297 tons, increasing from 240,638 tons last year or up 7%. With such production volumes over HDPE nameplate capacity of 250,000 tons per year, utilization rate was recorded at 103%. In 2007, HDPE production volumes from BPE were 209,834 tons, decreasing from 241,153 tons last year or down 13%. With such production volumes over HDPE nameplate capacity of 250,000 tons per year, utilization rate was recorded at 84%. In 2007, MEG’s production volumes from TOCGC were 313,883 tons, increasing from 152,585 tons last year or rose by 106%. With such production volumes over MEG nameplate capacity of 300,000 tons per year, utilization rate was reported at 105%. (TOCGC has started its commercial operation since 14 August 2006).

PTT CHEMICAL PUBLIC COMPANY LIMITED

101

2007

2006

Olefins Plant Capacity Utilization Olefins Yield

87% 66%

104% 65%

HDPE Unit of Olefins Plant I1 Capacity Utilization HDPE Yield

103% 97%

96% 96%

HDPE Plant of BPE Capacity Utilization

84%

96%

MEG Plant of TOCGC Capacity Utilization

105%

111%

Note: 1. Capacity utilization rate is calculated from actual production volumes divided by nameplate capacity. 2. In 1Q/2007 the olefins plant I4-1 was shutdown as planned for De-bottlenecking and maintenance for 67 days. 3. In 1Q/2007 the olefins plant I4-2 was shutdown as planned for checking and inspection of its equipment and maintenance during the warranty period for 40 days. 4. In 1Q/2007 the Oleflex unit of olefins plant I1 was shutdown as planned for inspection and maintenance for 22 days. 5. In 1Q/2007 TOCGC’s MEG plant was shutdown as planned for checking and inspection of its equipment and maintenance during the warranty period for 34 days. 6. In 1Q/2007 BPE’s HDPE plant was shutdown as planned for equipment inspection and maintenance for 61 days. 7. In 2Q/2007 olefins plant I1 experienced the unplanned shutdown for equipment maintenance due to its heavy utilization in 2006 for 46 days. 8. In 2Q/2007 olefins plant I1 HDPE unit was shutdown as planned for equipment maintenance for 12 days. 5. THE SALES OF PRODUCTS

In 2007, the ethylene sales volumes were 862,967 tons and the propylene were 345,827 tons down by 7% and 12% respectively. This was due to the plant shutdown for maintenance and Debottleneck

1 in 1H/2007. For olefins plant I1’s HDPE unit, HDPE sales volumes were recorded at 264,717 tons, up 11%. Sales volumes of the major subsidiaries, TOCGC and BPE, are shown as follows: - HDPE sales volumes of BPE in 2007 were 223,456 tons, down from 2006 at 230,528 tons or 3%. - MEG sales volumes of TOCGC in 2007 were 342,748 tons, up from 2006 at 105,434 tons or 225%.

6. FINANCIAL STATUS

Assets As of December 31, 2007, the Company had total assets of Baht 133,514 million, increasing from the end of 2006 of Baht 21,982 million or up 20% due to the following main reasons; Cash & cash equivalents The Company had remaining cash and cash equivalents of Baht 24,841 million, decreased by Baht 8,695 million or 26% due mainly to an increase in investment in the Company’s subsidiaries. 102

2007 ANNUAL REPORT

Trade accounts receivable The Company had trade accounts receivable of Baht 12,533 million, increased by Baht 5,040 million or 67% due mainly to an increase in product price and sales volumes. Property, plant and equipment-net The Company had property, plant and equipment-net of Baht 75,722 million, increased by Baht 23,931 million or 46% due to an increase in work in construction of the Company’s subsidiaries. Liabilities As of December 31, 2007, the Company had total liabilities of Baht 39,117 million, up from the end of 2006 by Baht 9,405 million or 32% due mainly to the followings; Trade accounts payable-related companies The Company reported trade accounts payable-related companies of Baht 8,402 million, increased by Baht 3,134 million or 59% mainly due to the sales and purchase of products and the services. Accounts payable-contractors The Company recorded accounts payable-contractors of Baht 4,400 million, increased by Baht 3,925 million or 826% due mainly to an increase in Company’s subsidiaries’ accounts payable for their construction. Debentures The Company had debentures of Baht 15,798 million, increased by Baht 2,921 million or 23% due mainly to the issuance of Baht 4,900 million debentures (Baht currency) in 4Q/2007. Shareholders’ Equity As of December 31, 2007, the Company recorded total shareholders’ equity of Baht 94,397 million, increased from the end of 2006 by Baht 12,577 million or 15% due mainly to an increase in the unappropriated retained earnings from Baht 26,568 million to Baht 39,044 million, or 47%. Cash flows As of December 31, 2007, the Company recorded cash flows from operations of Baht 21,050 million while cash flows from investments was of Baht 25,423 million, resulting in negative cash flows before financing activities (Free Cash Flow) of Baht 4,373 million. In addition, the Company had dividends payment and debenture/ long-term loan repayment totaling Baht 10,368 million, while received cash flow from debentures, long-term loan, capital increase, and premium on additional paid-in capital totaling Baht 6,140 million, resulting in the negative cash flows from financing of Baht 4,323 million. As a result, at the end of 2007 the Company’s cash and cash equivalents decreased by Baht 8,696 million; however, when concluded with the beginning cash on hand of Baht 33,537 million, the Company’s ending cash and cash equivalents was recorded at Baht 24,841 million as end of 2007.

PTT CHEMICAL PUBLIC COMPANY LIMITED

103

Important Financial Ratios

Current ratio (times) EBITDA to revenue (%) Net profit on revenue (%) Return on Total assets (%) Return on equity (%) Interest Barring Debt to equity (times) Net Debt to EBITDA (times) Net Debt to equity (times)

Note: Current ratio = EBITDA to revenue = (each period) Net profit on revenue = (each period) Return on total assets = Return on equity = Interest Barring Debt to equity = Net Debt to equity = Net Debt to EBITDA =

2007 2006

2.39 32.97 24.93 14.94 20.77 0.23 (0.12) (0.03)

4.00 32.75 25.17 15.58 21.26 0.24 (0.58) (0.20)

Current assets divided by current liabilities EBITDA divided by total revenue (exclude profits / (losses) from exchange rates and equity in net income of subsidiaries & associated companies) Net profit divided by total revenue (exclude profits/ (losses) from exchange rates and equity in net income of subsidiaries & associated companies) Net profit divided by average total assets (Calculated on the past four quarters) Net profit divided by average total shareholder’s equity (Calculated on the past four quarters) Interest Barring Debt divided by shareholder’s equity Interest Barring Debt net from cash and cash equivalent and current investments divided by shareholder’s equity Interest Barring Debt net from cash and cash equivalent and current investments divided by EBITDA

104

2007 ANNUAL REPORT

AUDIT FEES

AUDIT FEE

In 2007, PTT Chemical and its subsidiaries paid Baht 5.085 million in audit fee to the external auditor’s office. NON-AUDIT FEE

None

PTT CHEMICAL PUBLIC COMPANY LIMITED

105

Report of the Audit Committee REPORT OF THE AUDIT COMMITTEE

The Board of Directors of PTT Chemical PLC appointed the Audit Committee, whose members are experts in finance, accounting, economics, management, and the petrochemical industry, consisting of Mr. Olarn Chaipravat as Chairman, with Mr. Manu Leopairote and Mr. Paibulya Punyavutti as the other members. Their qualifications are in line with the Notification of the Stock Exchange of Thailand (SET) governing the qualifications and scope of performance of the audit committee, with a term in office of three years. The Committee has performed its duties and exercised its judgment under the scope of authority and duties specified in its charter, which was approved by the Board. The Committee held six meetings in 2007 and held meeting no. 1/2008 on 19 February 2008 to review the financial statements for the year 2007 and internal control for the same year. Company management and related executives also attended in their related agenda items. Reviews and recommendations were made by the Committee in each agenda item, summarized as follows: 1. Reviewed the Companyâ&#x20AC;&#x2122;s quarterly and annual financial statements, attended by related

management and the Company auditor, to ensure that these financial statements had been duly

prepared under generally accepted accounting principles and the sufficient disclosure of significant

matters had been made for the benefit of decision-making by the users. Connected transactions

were accurately and completely disclosed. The statements consisted of quarterly and annual

financial statements for 2007, which, according to the external auditor, were essentially accurate

under the generally accepted accounting principles. The Committee concurred with this; 2. Reviewed the internal control system assessment to ensure that the Company had adequate and

effective internal control that enabled it to achieve its objectives and, as such, acknowledged that

the system was both adequate and effective; 3. Reviewed the appropriateness and effectiveness of internal audit activities. The Committee reviewed

its own charter and that of the internal audit department, and approved the internal audit plan.

The Audit Committee followed-up on the performance of the Internal Audit Department to

acknowledge the audit result and the corrective actions according to the recommendation given in

the Audit Report, provided that a summary of audit result shall be proposed to the Board for

acknowledgement. The Audit Committee also acknowledged the result of the self-assessment of

the Internal Audit Department and advised on improvements; 4. Considered and proposed for approval the external auditor and its remuneration for the year 2007

to the Board, who would then seek approval from the shareholders;

106

2007 ANNUAL REPORT

5. Considered related and connected transaction, to ensure that the Company discloses its

information concerning connected transaction or information regarding conflicts of interest

accurately, sufficiently and in accordance with the Securities and Exchange Acts, the Notification of

the Stock Exchange of Thailand and any other relevant laws. In this regard, the Audit Committee

tracked and acknowledged connected transactions, disclosed in the notes to the annual and

quarterly financial statements; 6. Reviewed the Companyâ&#x20AC;&#x2122;s compliance with the Securities and Exchange laws, Notifications of SET,

and relevant laws. The Committee acknowledged the audit findings of the Internal Audit Department

governing its applications for licenses and Board of Investment privileges, acknowledged

performance relating to compliance with the accounting standard announced in 2006,

acknowledged the effects on the Company, as well as the change of accounting policy from the

revaluation of property plant and equipment to historical cost; 7. Monitored and advised the Company operations, particularly its key activities, namely risk

management, production operation, subsidiariesâ&#x20AC;&#x2122; operations, and sharing support activities for

accounting and finance; 8. Carried out self-assessment, the result of which is to be used in improving future performance; 9. Reported its activities in the annual information disclosure and the annual report, which is regularly

reported to the Board. The Committee appreciates the constructive cooperation given by the Board, the management, the external auditor, and all related parties in connection with the operation of the Audit Committee. On behalf of the Audit Committee (Mr. Olarn Chaipravat) Chairman 19 February 2008

PTT CHEMICAL PUBLIC COMPANY LIMITED

107

THE BOARD OF DIRECTORSâ&#x20AC;&#x2122; REPORT ON ITS RESPONSIBILITY TO FINANCIAL REPORT

Financial Statement of PTT Chemical Public Company Limited, and its subsidiaries included in the consolidated financial statements has been prepared in compliance with notification of Department of Commercial Registration dated September 14, 2001, under the third paragraph of section 11 of the Accounting Act 2000, in compliance with the accounting standard determined by the Federation of Accounting Professions. The responsibilities of the Board of Directors towards the financial report of PTT Chemical Public Company Limited, and its subsidiaries has been provided to ensure that it has revealed the financial status, incomes and expenses, and consolidated cash flow on a practical and reasonable basis and the accounting data has been properly recorded in relation to the property retention, including the anticorruption and abnormal transactions. Regarding the provision of the financial report, the Company has considered and selected proper accounting policy for regular practices in compliance with the generally accepted accounting standard and has disclosed significant data in the notes to the financial statement, which the auditor has expressed the opinions to the financial statements of PTT Chemical Public Company Limited and its subsidiaries in the auditorâ&#x20AC;&#x2122;s report. (Mr. Pornchai Rujiprapa) (Mr. Aditheb Bisalbutr) Chairman President

108

2007 ANNUAL REPORT

Financial Statements PTT CHEMICAL PUBLIC COMPANY LIMITED

PTT CHEMICAL PUBLIC COMPANY LIMITED

109

AUDITOR’ S REPORT

TO : THE SHAREHOLDERS OF PTT CHEMICAL PUBLIC COMPANY LIMITED

The Office of the Auditor General of Thailand has audited the accompanying consolidated balance sheets of PTT Chemical Public Company Limited and its subsidiaries and the balance sheets of PTT Chemical Public Company Limited as at December 31, 2007 and 2006 and the related consolidated and the Company’s statements of income, changes in shareholders, equity and cash flows for the year ended at the same date. These financial statements are the responsibility of the Company’s management as to their correctness and completeness of the presentation. The responsibility of the Office of the Auditor General of Thailand is to express an opinion on these financial statements based on the audits and other auditors’ reports. The financial statements of joint venture were audited by other auditors and included in the consolidated financial statements. The Office of the Auditor General of Thailand received the other auditors’ reports and used them as a basis in auditing and expressing an opinion on the consolidated financial statements. As at December 31, 2007, assets and liabilities of the above joint venture included in the consolidated financial statements constitute 0.42% and 0.85% and as at December 31, 2006 constitute 0.38% and 0.83%, respectively. The Office of the Auditor General of Thailand conducted the audits in accordance with generally accepted auditing standards. Those standards require that the Office of the Auditor General of Thailand 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

110

2007 ANNUAL REPORT

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. The Office of the Auditor General of Thailand believes that the audits together with the other auditors’ reports as above mentioned provide a reasonable basis for the opinion. In the opinion of the Office of the Auditor General of Thailand based on the audits and other auditors’ reports, the consolidated and the Company’s financial statements referred to above present fairly, in all material respects, the financial position of PTT Chemical Public Company Limited and its subsidiaries and of PTT Chemical Public Company Limited as at December 31, 2007 and 2006, and the results of operations, the changes in shareholders’ equity and the cash flows for the year ended at the same date in accordance with generally accepted accounting principles. The Office of the Auditor General of Thailand request to see note 4 changing in accounting policy for investment in subsidiaries, associated and joint venture from equity method to cost method in the company financial statement regarding Accounting Standard No.44 (revised 2007) and changing in accounting policy for property, plant and equipment from the revaluation by independent appraisal to historical cost in conformity with accounting policy of major shareholder. (Signed) Jaruvan Maintaka (Signed) Ladawan Supaprasert (Khunying Jaruvan Maintaka) (Miss Ladawan Supaprasert) Auditor General A Senior Audit Specialist Level 9 Acting Director of Audit Office

Office of the Auditor General February 22, 2008

PTT CHEMICAL PUBLIC COMPANY LIMITED

111

BALANCE SHEET (TRANSLATION) PTT CHEMICAL PUBLIC COMPANYPTT LIMITED AND SUBSIDIARIES CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEET AS AT DECEMBER 31, 2007 AND 2006 AS AT DECEMBER 31, 2007 AND 2006

Assets Current assets Cash and cash equivalents Trade accounts receivable - net Related companies Other companies Other accounts receivable - related parties Inventories - net Materials and supplies Short term loans - related parties Long term loans due within one year - related parties Other current assets Total current assets Non-current assets Investments Other long-term investments Long term loans - related parties Property, plant and equipment - net Intangible assets - net Deferred tax Other non-current assets Total non-current assets Total assets

Notes Notes

(Unit(Unit : Baht) : Baht) Consolidated TheCompany Company Only Consolidated The Only December 31, December31, 31, 2006 2006 December December 31, December31, 31, 2006 2006 December 31, 2007 2007 December 31, 2007 2007 December (Restated) (Restated) (Restated) (Restated)

24,841,306,890

33,536,683,795

22,713,158,467

30,822,161,815

6,7 7 6 8 9 13 13 10,33

8,507,436,367 4,025,226,549 61,951,262 4,225,177,445 2,017,689,169 1,408,467,422 45,087,255,104

5,783,397,777 1,709,296,324 63,678,682 3,972,363,964 1,723,322,003 2,157,456,311 48,946,198,856

8,470,892,012 252,587,453 147,334,336 3,178,391,530 1,768,403,342 4,400,000,000 784,977,029 41,715,744,169

6,098,231,108 376,783,415 162,310,541 2,629,455,715 1,545,010,616 452,227,500 1,432,854,195 43,519,034,905

4,11 12 13 4,14,33 15 16 17

6,904,766,317 290,238,392 75,721,775,281 4,959,367,351 811,945 549,327,620 88,426,286,906 133,513,542,010

5,036,299,269 591,469,026 51,791,444,222 4,534,749,554 574,394 630,528,180 62,585,064,645 111,531,263,501

35,730,925,513 290,238,392 6,162,772,500 33,786,536,860 520,561,759 811,945 330,130,776 76,821,977,745 118,537,721,914

23,598,665,513 591,469,026 4,522,772,500 31,796,638,272 566,368,701 574,394 290,906,689 61,367,395,095 104,886,430,000

Notes to Financials form an integral part of the financial statements.

-1-

112

2007 ANNUAL REPORT

(TRANSLATION) PTT CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES BALANCE SHEET AS AT DECEMBER 31, 2007 AND 2006

Liabilities and shareholders' equity Current liabilities Short-term loans Trade accounts payable Related companies Other companies Other accounts payable - related parties Accounts payable - contractors Retentions Current portion of payables under finance lease agreements Current portion of long-term loans Current portion of debenture Accrued interest expenses Income tax payable Other current liabilities Total current liabilities Non-current liabilities Payables under finance lease agreements - net of current portion Long-term loans - net of current portion Debenture - net of current portion Deferred income from initial rights fee for using pipe rack Pension fund Deferred tax Other non-current liabilities Total non-current liabilities Total liabilities

Notes Notes

(Unit(Unit : Baht) : Baht) Consolidated The Company Company Only Consolidated The Only December 31, December 31, 31, 2006 December 31, December 31, 31, 2006 2006 December 31,2007 2007 December 2006 December 31, 2007 2007 December (Restated) (Restated) (Restated) (Restated)

37,580,480 6 6

18 19 20

18 19 20 22 16 23

8,401,899,181 491,166,875 178,924,528 4,400,294,288 222,377,922 98,096,853 1,088,997,717 1,245,670,288 95,457,801 1,286,169,547 1,350,978,028 18,897,613,508

5,268,796,231 390,841,344 186,876,817 475,459,969 140,991,172 102,348,724 1,188,855,930 1,750,578,957 71,076,636 1,456,326,250 1,189,483,067 12,221,635,097

8,127,964,935 238,109,043 167,133,938 305,957,014 131,332,999 80,397,713 545,454,545 1,245,670,288 89,340,184 1,329,690,861 994,443,796 13,255,495,316

4,996,293,873 211,281,154 256,133,207 172,759,627 138,952,290 90,613,534 272,727,273 1,750,578,957 64,856,974 1,416,136,213 737,009,565 10,107,342,667

208,832,911 3,408,009,491 15,797,582,032 104,720,381 13,443,410 640,445,752 45,992,630 20,219,026,607 39,116,640,115

167,268,024 3,682,254,535 12,877,283,842 107,862,851 12,246,858 623,384,912 20,099,849 17,490,400,871 29,712,035,968

162,650,446 2,181,818,182 15,797,582,032 104,720,381 8,723,667 640,445,752 18,895,940,460 32,151,435,776

136,004,377 2,727,272,727 12,877,283,842 107,862,851 7,657,901 623,384,912 16,479,466,610 26,586,809,277

Notes to Financials form an integral part of the financial statements.

-2-

PTT CHEMICAL PUBLIC COMPANY LIMITED

113

BALANCE SHEET (TRANSLATION)

PTT CHEMICAL PUBLIC COMPANYPTT LIMITED AND SUBSIDIARIES CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES AS AT DECEMBER 31, 2007 AND 2006 BALANCE SHEET AS AT DECEMBER 31, 2007 AND 2006

Liabilities and shareholders' equity (Continued) Shareholders' equity Share capital Authorized share capital 1,519,115,300 ordinary shares of Baht 10 each Issued and paid-up share capital 1,490,115,300 ordinary shares of Baht 10 each 1,496,571,600 ordinary shares of Baht 10 each Additional paid-in capital Premium on ordinary shares Unrealised gain on changes in the value of investments Surplus on dilution of investments Retained earnings Appropriated Statutory reserve Reserve for loan repayment Reserve for expansion Unappropriated Equity attributable to the Company's shareholders Minority interest - equity attributable to minority shareholders of subsidiaries Total shareholders' equity Total liabilities and shareholders' equity

Notes Notes

: Baht) (Unit(Unit : Baht) Consolidated The Consolidated TheCompany Company Only Only December 2007 December 2007 December December 31, 31, 2007 December31, 31,2006 2006 December December 31, 31, 2007 December31, 31,2006 2006 (Restated) (Restated) (Restated) (Restated)

15,191,153,000

15,191,153,000 14,901,153,000

15,191,153,000

14,965,716,000

15,191,153,000 14,901,153,000

14,965,716,000

12 4

30,640,499,218 10,998,678

30,275,718,268 781,942 10,998,678

30,640,499,218 -

30,275,718,268 781,942 -

25.1 25.2 25.2 4

1,519,115,300 807,802,564 5,932,994,126 39,043,656,261 92,920,782,147

1,519,115,300 807,802,564 5,932,994,126 26,567,905,866 80,016,469,744

1,519,115,300 807,802,564 5,932,994,126 32,520,158,930 86,386,286,138

1,519,115,300 807,802,564 5,932,994,126 24,862,055,523 78,299,620,723

1,476,119,748 94,396,901,895 133,513,542,010 -

1,802,757,789 81,819,227,533 111,531,263,501 -

86,386,286,138 118,537,721,914 -

78,299,620,723 104,886,430,000 -

Notes to Financials form an integral part of the financial statements.

( Singned ) Aditheb Bisalbutr ( Aditheb Bisalbutr) Bisalbutr ) (Aditheb President President

( Signed ) Pala Sookawesh (Pala Sookawesh) Sookawesh) (Pala Director Director

-3-

114

2007 ANNUAL REPORT

STATEMENT OF INCOME (TRANSLATION)

PTT CHEMICAL PUBLIC COMPANYPTT LIMITED AND SUBSIDIARIES CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

Revenues

2007 2007

Notes Notes

Sales Service income Other income Interest income Dividend income Gain on exchange rate Gain from disposal of fixed assets Others Share of gain from investments accounted for under equity method Total revenues Expenses Cost of sales and services Selling and administrative expenses Directorsâ&#x20AC;&#x2122; remuneration Loss from disposal of fixed assets Total expenses Earnings before interest and income tax expenses Interest expenses and financial charges Income tax expenses 16 Earnings after income tax Earnings attributable to minority interest Net earnings for the period Basic earnings per share Net Profit Diluted earnings per share Net Profit

Consolidated Consolidated

2006 2006

(Restated) (Restated)

: Baht) (Unit(Unit : Baht) The Only The Company Company Only

2007 2007

2006 2006

(Restated) (Restated)

73,869,746,003 1,714,368,260

69,811,197,598 2,032,481,390

62,822,138,941 290,114,185

68,084,147,724 268,373,840

989,216,332 210,154,037 27,879,337 273,165,578 27,256,691 77,111,786,238

501,715,469 1,072,678,624 292,647,670 108,619,975 73,819,340,726

1,203,628,401 1,902,548,143 635,936,014 21,019,979 434,060,527 67,309,446,190

636,889,839 488,412,297 1,055,224,399 342,886,825 70,875,934,924

51,841,936,253 2,174,495,000 86,814,809 54,103,246,062 23,008,540,176 1,149,895,381 2,287,994,765 19,570,650,030 403,431,174 19,167,218,856

49,065,092,380 1,694,417,165 62,506,335 67,716,379 50,889,732,259 22,929,608,467 1,137,024,210 3,125,191,551 18,667,392,706 385,199,585 18,282,193,121

47,564,653,579 1,723,735,189 65,952,955 49,354,341,723 17,955,104,467 1,063,505,630 2,155,447,753 14,736,151,084 14,736,151,084

48,241,710,761 1,510,295,329 44,551,307 63,227,258 49,859,784,655 21,016,150,269 1,092,469,157 3,003,094,204 16,920,586,908 16,920,586,908

4,26

12.85

15.75

9.88

14.58

12.85

15.75

9.88

14.58

Notes to Financials form an integral part of the financial statements.

-4-

PTT CHEMICAL PUBLIC COMPANY LIMITED

115

116

2007 ANNUAL REPORT

paid-up paid-up

share capital capital share

14,901,153,000 ROUND(47 14,901,153,000 64,563,000 14,965,716,000

Balance as at December 31, 2006 As previously reported Effect of change in accounting policies Balance after adjustment Issue share capital Unrealised loss on changes in the value of investments Net income Dividend paid Minority interest Balance as at December 31, 2007

Notes to Financials statement form an integral part of these financial statements.

14,901,153,000

Balance as at December 31, 2005 Effect of change in accounting policies Balance after adjustment Issue share capital Unrealised gain on changes in the value of investments Surplus on dilution of investments Legal Reserve Net income Dividend paid Minority interest Balance as at December 31, 2006

11,311,410,000 (620,279,689 11,311,410,000 (392,650,406 3,589,743,000 (6,071,192) -

Note Note

Issued and and Issued

30,275,718,268 30,275,718,268 364,780,950 30,640,499,218

7,760,368,340 (7,760,368,340) -

5,865,465,868 12,541,704,734 (12,541,704,734) 5,865,465,868 24,410,252,400 30,275,718,268 -

Premium on on Premium

Revaluation Revaluation surplus surplus on on assets assets

-5-

781,942 781,942 (781,942) -

781,942 781,942

Unrealised Unrealised gain(loss) gain (loss)onon change change ininthe thevalue value ofof investment investment

10,998,678 10,998,678 10,998,678

10,998,678 10,998,678

Surplus Surplus on on dilution of dilution of investments investments

1,519,115,300 1,519,115,300 1,519,115,300

1,131,141,000 1,131,141,000 387,974,300 1,519,115,300

Legal Legal reserve reserve

Consolidated Consolidated

(TRANSLATION) PTT CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

shares capital shares capital

PTT CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

STATEMENTS OF CHANGES IN SHAREHOLDERSâ&#x20AC;&#x2122; EQUITY

807,802,564 807,802,564 807,802,564

807,802,564 807,802,564 807,802,564 5,932,994,126 5,932,994,126 5,932,994,126

5,932,994,126 5,932,994,126 5,932,994,126

Retained Retained earnings earnings Appropriated Appropriated Reserve Reserve Reservefor for Reservefor for loan expansion loan repayment repayment expansion

27,191,233,426 (236,748,344) 26,954,485,082 19,167,218,856 (7,078,047,677) 39,043,656,261

18,170,174,640 (1,012,930,095) 17,157,244,545 (387,974,300) 18,282,193,121 (8,483,557,500) 26,567,905,866

Unappropriated Unappropriated

Total Total

1,779,243,871 23,513,918 1,802,757,789 (326,638,041) 1,476,119,748

90,179,409,515 (7,973,602,766) 82,205,806,749 429,343,950 (781,942) 19,167,218,856 (7,078,047,677) (326,638,041) 94,396,901,895

1,724,505,694 57,485,198,626 23,513,918 (13,531,120,911) 1,748,019,612 43,954,077,715 27,999,995,400 781,942 10,998,678 18,282,193,121 (8,483,557,500) 54,738,177 54,738,177 1,802,757,789 81,819,227,533

Minority Minority interest interest

(Unit : Baht) Unit : Baht

PTT CHEMICAL PUBLIC COMPANY LIMITED

117

Notes to Financials statement form an integral part of these financial statements.

Balance as at December 31, 2005 As previously reported Effect of change in accounting policies Balance after adjustment Issue share capital Unrealised gain on changes in the value of investments Legal Reserve Net income Dividend paid Balance as at December 31, 2006

Note Note

PTT CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

14,901,153,000 14,901,153,000 64,563,000 14,965,716,000

11,311,410,000 11,311,410,000 3,589,743,000 14,901,153,000

share capital share capital

paid-up paid-up

Issued and Issued and

30,275,718,268 30,275,718,268 364,780,950 30,640,499,218

-6-

7,760,368,340 (7,760,368,340) -

5,865,465,868 12,541,704,734 (12,541,704,734) 5,865,465,868 24,410,252,400 30,275,718,268 -

Premium on Premium on

shares capital shares capital

Revaluation Revaluation surplus surplus on assets assets on

Unrealised Unrealised

781,942 781,942 (781,942) -

781,942 781,942

of investment of investment

change in change in the the value value

gain(loss) gain (loss) on on dilution ofof dilution

10,998,678 (10,998,678) -

investments investments

Surplus on Surplus on

1,519,115,300 1,519,115,300 1,519,115,300

1,131,141,000 1,131,141,000 387,974,300 1,519,115,300

Legal Legal

reserve reserve

The TheCompany Company

(TRANSLATION) PTT CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

STATEMENTS OF CHANGES IN SHAREHOLDERSâ&#x20AC;&#x2122; EQUITY

807,802,564 807,802,564 807,802,564

5,932,994,126 5,932,994,126 5,932,994,126

Retainedearnings earnings Retained Appropriated Appropriated Reserve Reserve Reservefor for Reservefor for expansion loan loan repayment repayment expansion

27,191,233,426 (2,329,177,903) 24,862,055,523 14,736,151,084 (7,078,047,677) 32,520,158,930

18,170,174,640 (1,357,174,225) 16,813,000,415 (387,974,300) 16,920,586,908 (8,483,557,500) 24,862,055,523

Unappropriated Unappropriated

88,400,165,644 (10,100,544,921) 78,299,620,723 429,343,950 (781,942) 14,736,151,084 (7,078,047,677) 86,386,286,138

55,760,692,932 (13,898,878,959) 41,861,813,973 27,999,995,400 781,942 16,920,586,908 (8,483,557,500) 78,299,620,723

Total Total

(Unit : Baht) Unit : Baht

STATEMENT OF CASH FLOW (TRANSLATION) PTT CHEMICAL PUBLIC COMPANYPTTLIMITED AND SUBSIDIARIES CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENT OF CASHFLOW FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006 FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006 2007 2007 Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to cash from (used in) operating activities : Earnings attributable to minority interest Depreciation and amortisation (Gain) Losses on disposal of equipment Unrealised gain on exchange rate Unrealised gain on changes in the value of investments Pension fund Income recognised from advances from fluid loading/ unloading facilities, buffer tank farm services users Income from initial rights fee for using pipe rack amortization Deferred income taxes Deferred interest financial lease Dividend income Share of (gain) loss from investments accounted for under equity method Earnings from operating activities before changes in operating assets and liabilities (Increase) decrease in operating assets Trade accounts receivable Other accounts receivable - related parities Inventories Materials and supplies Other current assets Increase (decrease) in operating liabilities Trade accounts payable Other accounts payable - related parities Retentions Accrued interest expenses Income tax payable Deferred income from initial rights fee for using pipe rack Accrued expenses and other current liabilities Net cash from operating activities

Consolidated Consolidated

2006 2006

(Restated) (Restated)

(Unit(Unit : Baht) : Baht) The Company Company Only The Only 2007 2006 2007 2006 (Restated) (Restated)

18,282,193,121

14,736,151,084

16,920,586,908 16,920,586,908

403,431,174 3,567,369,098 (27,756,946) (507,274,180) 1,196,553

385,199,545 2,625,649,233 67,525,742 (1,211,691,452) (2,102,695) 323,739

2,591,783,105 (21,019,979) (763,291,456) 1,065,767

2,174,629,758 63,023,351 (1,224,772,006) (2,102,695) 277,470

(14,432,479) 16,823,289 43,205,282 (27,256,691)

(3,666,070) (23,144,243) 2,530,828 12,026,509 (108,619,975)

(14,432,479) 16,823,289 13,714,863 (1,902,548,143) -

(1,847,594) (23,144,243) 2,530,828 11,767,351 (488,412,297) -

22,622,523,956

20,026,224,282

14,658,246,051

17,432,536,831

(5,063,593,369) (4,606,409) (252,813,480) (280,321,847) 496,424,726

(2,915,838,799) (294,894,838) (756,273,468) (255,338,195) (4,258,978,923)

(2,248,115,322) 14,976,205 (548,935,814) (227,714,377) 704,400,232

(206,694,872) (52,608,144) (215,209,698) (199,329,696) (743,455,942)

3,282,815,110 (41,070,197) 81,386,750 23,991,950 (85,538,159) 10,827,598 260,129,300 21,050,155,929

1,557,625,469 543,707,857 57,422,804 (47,081,019) 427,728,212 13,963,829 435,842,895 14,534,110,106

3,161,785,737 (88,999,269) (7,619,291) 24,483,210 (86,445,352) 12,637,484 256,934,375 15,625,633,869

(421,253,276) 233,502,307 56,092,264 (30,137,224) 402,516,349 13,963,829 330,137,435 16,600,060,163

19,167,218,856 19,167,218,856

Notes to Financials form an integral part of the financial statements.

-7-

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2007 ANNUAL REPORT

(TRANSLATION) PTT CHEMICAL PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENT OF CASHFLOW FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006 2007 2007

Cash flows from investing activities Dividends received Cash received from long-term investment Proceeds from investments in subsidiaries Payment of investments in subsidiaries Payment of investments in associates Payment of investments in joint ventures Payment for Property, plants and equipment Proceeds from sales of Property, plants and equipment Payment of intangible assets Cash received from sales of investment Payment for acquisition of investment Payment for short-term loan to related parties Cash received from short-term loan to related parties Payment for long-term loan to related parties Cash received from long-term loan to related parties Increase on other non-current assets Net cash used in investing activities Cash flows from financing activities Payment of payables under finance lease agreements Decrease in bank overdrafts and short-term loans Dividends paid Payment debenture Cash received from debenture Payment long term loan Cash received from long term loan Cash received from issue share capital Premium on ordinary shares Net cash provided by (used in) financing activities Net decrease in cash and cash equivalents Effect from exchange rate in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

Consolidated Consolidated

2006 2006

(Restated) (Restated)

: Baht) (Unit(Unit : Baht) TheCompany Company Only The Only 2007 2006 2007 2006 (Restated) (Restated)

36,049,643 300,448,691 (1,877,260,000) (23,274,542,159) 49,263,855 (525,809,029) (130,700,133) (25,422,549,132)

172,227,330 4,849,000 (3,240,401,612) (1,450,521,865) (8,512,629,105) 5,437,975 (250,984,768) 301,292,094 (300,448,691) 29,005,361 (13,242,174,281)

1,902,548,143 300,448,691 (10,255,000,000) (1,877,260,000) (4,175,937,319) 40,608,533 (35,519,874) (4,657,500,000) 257,500,000 (4,240,000,000) 3,052,227,500 (120,835,425) (19,808,719,751)

488,937,330 (8,557,273,600) (1,450,521,865) (52,500,000) (5,832,883,868) 4,894,535 (36,359,519) 301,292,094 (300,448,691) (3,130,000,000) 1,500,000,000 (1,379,764) (17,066,243,348)

(132,010,980) 37,580,480 (7,422,104,313) (1,757,142,595) 4,869,299,347 (1,188,855,930) 841,000,000 64,563,000 364,780,950 (4,322,890,041) (8,695,283,244) (93,661) 33,536,683,795 24,841,306,890

(63,460,364) (1,458,479) (8,788,413,738) (4,257,142,602) (387,071,070) 3,125,000,000 3,594,592,000 24,410,252,400 17,632,298,147 18,924,233,972 (274,834,225) 14,887,284,048 33,536,683,795

(116,076,582) (7,078,614,313) (1,757,142,595) 4,869,299,347 (272,727,273) 64,563,000 364,780,950 (3,925,917,466) (8,109,003,348) 30,822,161,815 22,713,158,467

(57,780,721) (1,458,479) (8,484,123,738) (4,257,142,602) 3,000,000,000 3,589,743,000 24,410,252,400 18,199,489,860 17,733,306,675 (275,257,276) 13,364,112,416 30,822,161,815

Supplemental disclosures of cash flows information: Cash paid during the period for Interest expenses Income tax

733,498,326 2,396,955,906

996,106,392 2,997,469,633

896,969,402 2,225,069,817

923,711,862 2,997,290,097

Notes to Financials form an integral part of the financial statements.

-8-

PTT CHEMICAL PUBLIC COMPANY LIMITED

119

NOTES TO THE FINANCIAL STATEMENTS

PTT CHEMICAL PUBLIC LIMITEDPUBLIC AND SUBSIDIARIES PTTCOMPANY CHEMICAL COMPANY LIMITED AND SUBSIDIARIES FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2007 AND 2006

General Information 1.1. General Information 1.1 PTT Chemical Public Company Limited (“The Company”) was created as a result of the amalgamation of National Petrochemical Public Company Limited and Thai Olefins Public Company Limited, under the Public Limited Companies Act B.E. 2535 (1992), on December 7, 2005, which National Petrochemical Public Company Limited and Thai Olefins Public Company Limited were terminated. The Company will undertake all assets, liabilities, rights, duties, and obligations of both merged companies. 1.2 The Company is registered as a public limited company under Thai laws and listed on the Stock Exchange of Thailand. The registered office of the Company is at 123, 31 st - 35th Floor, Suntowers Building B, Vibhavadi-Rangsit Road, Chomphon, Chatuchak, Bangkok. The principle activity of the Company is the production and distribution of Ethylene, Propylene and Polyethylene. By products are Mixed C4, Pyrolysis gasoline, Cracker bottom and Tail gas. Minor activity is the production and distribution of electricity, water, steam and other utilities. In addition, the Company also operates production support facilities such as jetty and buffer tank farm services for liquid chemical, oil and gas. 1.3 The revised Thai Accounting Standard effective for the year 2007.

On May 2 , 2007, The Federation of Accounting Professional announce for revised Thai Accounting Standard (TAS) are as follow : TAS No.44

Consolidated and Separate Financial Statements

TAS No.45

Investments in Associates

TAS No.46

Interests in Joint Ventures

The revised TAS No.44 Consolidated and Separate Financial Statements , TAS No.45 Investments in Associates and TAS No.46 Interests in Joint Ventures are effective for the accounting period beginning on or after 1 January 2007 that disclosed in Note 3.17 for Preparation Preparation of 2.2. Basic Basis for of Financial FinancialStatements Statements The consolidated and the Company’s financial statements have been prepared in accordance with generally accepted accounting principles under the Accounting Act B.E. 2543 (2000) being those Thai Accounting Standards which is issued by the Accounting Profession Act B.E. 2547 (2004), and the financial reporting requirements of the Securities and Exchange Commission of Thailand under the Securities and Exchange Act B.E. 2535 (1992).

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2007 ANNUAL REPORT

The Company presents financial statements in compliance with notification of Department of Commercial Registration, dated September 14, B.E. 2544 (2001), â&#x20AC;&#x153;Define the abbreviation component required in the financial statement, B.E 2544 (2001)â&#x20AC;? under the third paragraph of section 11 of the Accounting Act B.E. 2543 (2000). The consolidated financial statements for the year eanded ended December 31, 2007 and 2005 comprise the Company, subsidiaries and joint venture (the Group). A listing of the subsidiaries and joint venture are set out in Note 11.1. For the convenience of the readers, an English language translation of the financial statements has been prepared from the Thai language financial statements.

Significant Accounting 3.3. Significant AccountingPolicies Policies The significant accounting policies adopted in the preparation of these consolidated and the Company financial statements are set out below. 3.1 Revenue and Expense Recognition Sales are recognised when delivery has taken place and transfer of risks and rewards of ownership of the goods have passed to the buyer. Service income is recognised on the accrual basis. Interest income is recognised on a time proportion basis by using the effective yield of an interest bearing asset, unless there is doubt as to collectibles. Expenses are recognised on the accrual basis.

3.2 Cash and Cash Equivalents Cash and cash equivalents consist of cash and deposits at financial institutions with an original maturity of three months or less and without restriction. 3.3 Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are carried at net realisable value. Allowance is based on collection experience and payment ability of accounts receivable at the balance sheet date, to consider adequacy of allowance for doubtful accounts receivable to take into account overdue balance of each debtor. 3.4 Inventories Inventories are stated at the lower of cost of acquisition or net realisable value. Cost is determinated by using the weighted average cost method. A subsidiary apply the first-in, first-out method to determine the inventory costs which the effect of different accounting policies for inventories is not substantial. The cost of finished goods comprises raw materials, other direct costs and related production overheads, the latter

PTT CHEMICAL PUBLIC COMPANY LIMITED

121

being allocated on the basis of normal operating activities. Net realisable value is the estimated selling price in the ordinary business less the costs of completion and selling expenses. Allowance is recognized for obsolete, slow-moving and defective inventories. 3.5 Investments Investments in subsidiaries, associates, and joint venture have been presented in the Company the financial statements under the cost method. The effect from changing in this accounting policy stated in note 4. Investments in subsidiaries, associates, and joint venture have been presented in the consolidated financial statements under the equity method. Investments in Subsidiaries Subsidiaries are those entities in which the Group has the power, directly or indirectly, to exercise control over the financial policies and operations so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Investments in Joint Ventures Joint ventures are entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group’s proportionate share of the entities’ assets, liabilities, revenue and expenses with items of a similar nature on a line by line basis, from the date that joint control commences until the date that joint control ceases. Investments in Associates Associates are entities over which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of gains or losses in associates under the equity method, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in the associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations or made payments on behalf of the associate. A list of associates of the Group is set out in Note 11.2 Other Investments Investments other than investments in subsidiaries, associates and joint ventures are classified as trading, available-for-sale securities, held-to-maturity and general investments. Debt securities and marketable equity securities held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the statement of income.

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2007 ANNUAL REPORT

Debt securities that the Group intends and is able to hold to maturity are stated at amortised cost less impairment losses. The difference between the acquisition cost and redemption value of such debt securities is amortised using the effective interest rate method over the period to maturity. Debt securities and marketable equity securities other than those securities held for trading or intended to be held to maturity, are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity. The exceptions are impairment losses and foreign exchange gains and losses, which are recognised in the statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the statement of income. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the statement of income. Investments in non-marketable equity securities, which are classified as general investments, are carried at cost in the balance sheet and adjusted for impairment to recognize unrealized losses on investments if the value of the investments decreases substantially. A test for impairment is carried out when there is a factor indicating that an investment might be impaired if the carrying value of the investment is higher than its recoverable amount. Impairment loss is recognized in the statement of income immediately. On disposal of investment, the differences between the net disposal proceeds and the carrying amounts are charged or credited immediately to the statement of income. When disposing a part of the Groupâ&#x20AC;&#x2122;s particular investment in debt or equity securities, the carrying amount of the disposed part is determined by reference to the weighted average carrying amount of the total holding of the investment. 3.6 Property, Plant and Equipment Property, plant and equipment are carried at cost less accumulated depreciation and allowance for impairment of assets (if any). The group of Company has been change in accounting policy from the revaluation of property, plant and equipment to historical cost that it effect is stated in note 4. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are included in determining income. Expenditures for additions, renewals and improvements are capitalized. Repair and maintenance costs are recognised as expenses when incurred.

PTT CHEMICAL PUBLIC COMPANY LIMITED

123

3.7 Depreciation and Amortization Depreciation of property, plant and equipment is calculated by reference to their costs on the straight-line method over its estimated useful life as follow : Buildings Leasehold improvement Olefins plant, machinery and equipment Utilities plant, machinery and equipment Polyethylene plastics plant, machinery and equipment Pipeline and metering station system Jetty and buffer tank farm facilities Storage tanks, ancillary facilities and others Transportation equipment Office furniture and equipment Computer equipment Plant equipment and common facilities

20 6 - 30 4 - 25 6 - 25 15 - 25 20 15 - 25 5 - 40 5 5 - 10 3- 5 5 - 15

years years years years years years years years years years years years

No depreciation has been provided for land and construction in progress. Catalyst used in production is deferred and amortized by straight-line method over the periods of 2 to 5 years. 3.8 Intangible Assets and Amortization Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets of the acquirer. Amortization of goodwill is calculated using the straight-line method over the estimated economic useful life of 10 years. License fee for olefins and polyethylene plastics production process is carried at cost less accumulated amortization. Amortization of license fee for olefins and polyethylene plastics production process is calculated on the straight-line method over the estimated useful life of 10 and 20 years. Computer software is carried at cost less accumulated amortization. Amortization is calculated on the straight-line method over the estimated useful life of 5 and 10 years. Right to use pipe rack is carried at cost less accumulated amortization. Amortization is calculated on the straight-line method over the period of 15 years. 3.9 Deferred Income Tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The 13

124

2007 ANNUAL REPORT

principle temporary differences arise from accumulated depreciation of adjusted useful life of plant property and equipments, financial lease, the difference between the fair value of derived assets and their tax bases. Tax rates as at the balance sheet date are used in the determination of deferred income tax. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. 3.10 Financial Leases The Company and its subsidiaries recorded equipments and vehicles under finance leases as assets and liabilities in the balance sheet at the lower of fair value or estimated present value of the underlying lease payments. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease agreement. The interest charge is recorded to periods during the lease term on the remaining balance of the liabilities for each period. Assets arising from finance leases are depreciated over the estimated useful life of those assets. 3.11 Capitalization of Borrowing Costs The Company and its subsidiaries capitalize interest expenses and other financial charges relating to the construction and supply costs as part of the project costs and gains or losses on exchange rate from interest adjustment of foreign loan are also capitalized. The capitalization of the borrowing cost will be discontinued when the construction is completed and ready for intended use. 3.12 Foreign Currency Translations Translations in foreign currencies incurred during the year are translated into Baht at the exchange rates prevailing at the transaction dates. Monetary assets and liabilities as at the balance sheet date denominated in foreign currencies are translated into Baht at the exchange prevailing at rate the balance sheet date with the exception of those covered by forward foreign exchange contracts at the contracted rate. Gains and losses on exchange are included in determining earnings. 3.13 Provident Fund The Group has jointly established a provident fund as approved by the Ministry of Finance in accordance with the Provident Fund Act B.E. 2530 (1987). The fund is contributed to by both employees and the Company and subsidiaries at certain percentages of the employeesâ&#x20AC;&#x2122; salaries, depending on length of employment, and will be paid to employees upon termination in accordance with the rules of the fund.

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125

3.14 Financial Instruments The Company and its subsidiaries have no policy to speculate in or engage in the trading of any financial derivative instruments. Financial instruments carried on the balance sheet include cash and cash equivalents, current investments, trade accounts receivable, trade accounts payable, liabilities from finance leases, bills of exchange, longterm loans and debentures. Derivative financial instruments are recognized initially at cost. Subsequently, they are carried at fair value. The gain or loss on re-measurement to fair value is recognized in the statement of income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain of loss depends on the nature of the item being hedged. The fair values of forward foreign exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. 3.15 Basic earnings per share Basic earnings per share is calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares held by third parties in issue during the year. 3.16 Use of accounting estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates for certain accounting transactions that affect the reported amounts in the financial statements and notes to financial statements. Subsequent actual results may differ from these estimates. 3.17 Use of new accounting standard In October 2006, the Federation of Accounting Professions issued Notification No. 26/2006 regarding Accounting Standard No. 44 â&#x20AC;&#x153;Consolidated Financial Statements and Accounting for Investments in Subsidiariesâ&#x20AC;? (Amendment No. 1), under which investments in subsidiaries, jointly controlled entities and associates are to be presented in the separate financial statements under the cost method rather than the equity method. Entities which are not ready to adopt the cost method in 2006 can continue to use the equity method through the end of 2006 and adopt the cost method as from 1 January 2007. In this regard, the Company has elected to adopt the change in 2007. 4.4. Changes ChangesininAccounting Accounting In the year 2007 , the Company has been changed in accounting policy for investment in subsidiaries, associated and joint venture from equity method to cost method in the company financial statement regarding Accounting Standard No.44(revised 2007) and has been changed in accounting policy for

126

2007 ANNUAL REPORT

property, plantplant and and equipment fromfrom the revaluation of property, plantplant and and equipment to historical cost cost in in property, equipment the revaluation of property, equipment to historical conformity withwith accounting policy of major shareholder. In the of such accounting policy, the the conformity accounting policy of major shareholder. In change the change of such accounting policy, Company and and a subsidiary mademade retrospective adjustment withwith the the consolidated and and the the Companyâ&#x20AC;&#x2122;s Company a subsidiary retrospective adjustment consolidated Companyâ&#x20AC;&#x2122;s financial statements for the yearyear 20062006 for comparative figures. ThisThis change had had effecteffect to financial financial statements for the for comparative figures. change to financial statement as follow : : statement as follow Unit Unit : Million Baht Baht : Million Consolidated Consolidated

The Company The Company

Balance sheetsheet as at asDecember 31, 2006 Balance at December 31, 2006 Investments account underunder equityequity method, decreased Investments account method, decreased

2,481.31 2,481.31

11,562.96 11,562.96

10,822.02 10,822.02

tax liability, decreased Deferred tax liability, decreased Deferred

3,202.79 3,202.79

Revaluation surplus on assets, decreased Revaluation surplus on assets, decreased

7,760.37 7,760.37

Property, plantplant and equipment-net, decreased Property, and equipment-net, decreased

Surplus on dilution of investments, decreased Surplus on dilution of investments, decreased

11.0011.00

Unappropriated retained earnings, decreased Unappropriated retained earnings, decreased

623.32 623.32

2,329.17 2,329.17

interest, increased Minority interest, increased Minority

23.5223.52

Dividend received, increased Dividend received, increased

488.41 488.41

of gain fromfrom investments accounted underunder equityequity method, decreased ShareShare of gain investments accounted method, decreased

1,823.54 1,823.54

1,222.87 1,222.87

1,172.89 1,172.89

13.7613.76

Income tax, increased Income tax, increased

236.75 236.75

Net income, increased(decreased) Net income, increased(decreased)

999.88 999.88

(385.23) (385.23)

Statement of income for theforyear endedended December 31, 2006 Statement of income the year December 31, 2006

Cost Cost of sales and service, decreased of sales and service, decreased Selling and administrative expenses, decreased Selling and administrative expenses, decreased

of minority interest, increased Income of minority interest, increased Income

23.5223.52

BasicBasic earnings per share, increased (decreased ) ) earnings per share, increased (decreased

PTT CHEMICAL PUBLIC COMPANY LIMITED

16 16

Baht Baht 0.84 0.84 per share 0.33 0.33 per share) per share (Baht(Baht per share)

127

5.5. Cash Cash and and Cash CashEquivalents Equivalents Cash and cash equivalents as at December 31, 2007 and 2006 are as follows :

Unit : Million Baht The Company

Consolidated Cash in hand

December 31, 2007 44.52

December 31, 2006 15.10

December 31, 2007 12.73

December 31, 2006 3.43

Cash at banks Promissory notes

5,846.54 18,950.25

4,764.36 28,757.22

4,513.43 18,187.00

2,710.73 28,108.00

Total

24,841.31

33,536.68

22,713.16

30,822.16

6.6. Related RelatedParty PartyTransactions Transactions During this year 2007 and 2006, the Company had significant business transactions with its related parties (related by ways of co-shareholders and/or co-directors). Such transactions, which mainly were sales and purchases of products and service charge, were conducted at prices based on market prices or at contractually agreed prices where no market prices exist. Those business transactions are summarised below : Consolidated Company 1. PTT Public Company Limited

Relationship Major shareholder and co-directors

2. HMC Polymers Company Limited

Shareholders and co-directors

3. Thai Plastic and Chemical Public Company Limited

Shareholders and co-directors

4. Thai Polyethylene Company Limited

128

Shareholders and co-directors

Related transaction Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Other income Sales of products Service income Purchase of raw material, chemical and others Other expenses Sales of products Service income Other expenses

Unit : Million Baht 2007 2006 3,227.27 4,579.89 23.38 45.17 8.53 12.83 37,210.90 270.35 3,528.67 2.88 1.11 3,002.80 127.73

38,798.62 103.31 1,609.31 4.82 3,903.39 122.45

15.64 6,489.22 4.79 0.43

13.94 4.45 9,038.14 7.39 -

2007 ANNUAL REPORT

Company 5. Thai Polypropylene Company Limited

Relationship Shareholders and co-directors

6. PTT Aromatics and Refinery Public Company Shareholders and co-directors Limited (From merger of The Aromatics(Thailand) PLC. and Rayong Refinery PLC.)

7. Rayong Olefins Company Limited

Shareholders and co-directors

8. TPC Paste Resin Company Limited 9. Siam Styrene Monomer Company Limited

Shareholders and co-directors Shareholders and co-directors

10. Siam Mitsui PTA Company Limited

Shareholders and co-directors

11. Pacific Plastics (Thailand) Company Limited 12. Vinythai Public Company Limited

Shareholders and co-directors Associated and co-directors

13. IRPC Public Company Limited

Shareholders and co-directors

14. Bangkok Synthetics Company Limited

15. PTT Utility Company Limited

Shareholders and co-directors

Associated and co-directors

18 PTT CHEMICAL PUBLIC COMPANY LIMITED

Related transaction Sales of products Service income Other income Purchase of raw material, chemical and others Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Sales of products Service income Service income Other income Service income Sales of products Service income Other income Other expenses Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Purchase of raw material, chemical and others Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses

Unit : Million Baht 2007 2006 2,994.57 3,633.67 4.88 5.13 0.04 0.04 2,853.78 570.11 2.62

0.74 14,109.79 654.04 0.56

853.22 301.89 0.90 -

7,527.23 189.92 211.74 0.46 0.15

2,894.18 52.73 2,222.45 55.19 56.85 25.66 5,193.94 55.76 0.16 13.48 4,829.09 21.03 0.31

362.54 0.01 53.99 2,513.27 68.02 65.30 0.06 30.55 3,413.36 106.12 13.79 6,618.47 0.35 0.29

195.50 357.01 1,296.95 30.19

8.73 9.72 1,515.56 38.45

44.69 1.01 29.92 4.31

63.43 51.43 7.10 11.13

668.66 0.07

6.68 328.06

129

Company 16. PTT Phenol Company Limited

Relationship Associated and co-directors

17. PTT Polymer Marketing Company Limited

Associated and co-directors

18. PTT Polymer Logistic Company Limited 19. PTT ICT Solutions Company Limited

Co-directors Associated and co-directors

20. Bangkok Industrial Gas Company Limited

Co-directors

21. Dhipaya Insurance Public Company Limited 22. Thai Industrial Gas Public Company Limited

23. Eastern Fluid Transport Company Limited

Co-directors Co-directors

15% of shares held by the Company and co-directors

24. Star Petroleum Refining Company Limited

Co-shareholders

25. Thai Petroleum Pipeline Company Limited 26. Vopak Holding International B.V.

Co-shareholders Holding of 49% of shares in subsidiary

27. Cognis Thai Company Limited

Holding of 50% of Joint venture

28. Cognis Oleochemicals (M) SDN BHD

Related with Co-Investment Company Shareholders and Co-directors

29. PTT Exploration and Production Public Company Limited 30. Other Company

130

Co-directors

Related transaction Sales of products Service income Other income Sales of products Service income Other income Other expenses Other income Service income Other income Other expenses Sales of products Service income Purchase of raw material, chemical and others Other expenses Other expenses Sales of products Service income Purchase of raw material, chemical and others Other expenses Service income Purchase of raw material, chemical and others Other expenses Sales of products Service income Purchase of raw material Service income Service income Purchase of raw material, chemical and others Other expenses Other income Other expenses Purchase of raw material, chemical and others Sales of products Service income Sales of products Service income

Unit : Million Baht 2007 2006 0.03 1.36 (2.17) 3.00 8.36 19,795.41 10,283.18 1.25 3.57 3.98 15.72 0.31 3.11 3.58 0.90 7.92 19.29 8.55 139.57 18.64 39.24 124.80 0.36 0.17 76.17 7.69 218.73 0.12 0.86

91.83 4.94 119.50 0.45

0.11 26.48 -

0.68

0.95 6.12 0.02 2.13 853.22 1.65 -

5.42 4.15 0.04 0.09 1,554.06 1.49 0.26

29.50 9.04 3.57 2.55

27.85 22.85 0.39 3.84

7.22 10.61 6.74 1.15 0.08

198.36 -

19 2007 ANNUAL REPORT

The Company Company 1. PTT Public Company Limited

Relationship Major shareholder and co-directors

2. HMC Polymers Company Limited

Shareholders and co-directors

3. Thai Plastic and Chemical Public Company Limited

Shareholders and co-directors

4. Thai Polyethylene Company Limited

Shareholders and co-directors

5. Thai Polypropylene Company Limited

Shareholders and co-directors

6. PTT Aromatics and Refinery Public Company Limited From merger ofThe Aromatics (Thailand) PLC. and Rayong Refinery PLC.

7. Rayong Olefins Company Limited

Shareholders and co-directors

8. TPC Paste Resin Company Limited 9. Siam Styrene Monomer Company Limited

Shareholders and co-directors Shareholders and co-directors

10. Siam Mitsui PTA Company Limited

Shareholders and co-directors

Related transaction Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Sales of products Service income Purchase of raw material, chemical and others Other expenses Sales of products Service income Other income Sales of products Service income Other income Purchase of raw material, chemical and others Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Sales of products Service income Service income Other income

Unit : Million Baht 2007 2006 3,227.23 4,579.89 12.47 8.72 6.97 12.83 37,193.04 262.84 3,528.59 0.19 3,002.80 127.52

29,627.55 70.05 791.91 0.01 3,903.39 121.42

15.64 6,489.22 4.40 0.43 2,994.57 4.88 0.04

13.94 4.45 9,038.14 6.23 3,633.67 4.89 0.05

2,885.46 4.99 2.62

0.74 3,196.68 2.76 0.06

853.22 301.89 0.15 -

7,314.65 189.92 211.74 0.15 0.15

2,894.18 52.73 2,222.45 0.31 -

262.27 0.01 53.99 2,513.27 0.22 0.03 0.06

PTT CHEMICAL PUBLIC COMPANY LIMITED

131

Company 11. Vinythai Public Company Limited

Relationship Associated and co-directors

12. IRPC Public Company Limited

Shareholders and co-directors

13. Bangkok Synthetics Company Limited

14. Bangkok Polyethylene Public Company Limited

15. PTT Utility Company Limited

Shareholders and co-directors

Subsidiary company and co-directors

Associated and co-directors

16. PTT Polyethylene Company Limited

Subsidiary and co-directors

17. PTT Phenol Company Limited

Associated and co-directors

18. PTT Polymer Marketing Company Limited

Associated and co-directors

19. PTT Polymer Logistic Company Limited 20. PTT ICT Solutions Company Limited

Co-directors Associated and co-directors

21. Thai Tank Terminal Limited

Subsidiary and co-directors

132

Related transaction Sales of products Service income Other expenses Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Purchase of raw material, chemical and others Sales of products Other income Purchase of raw material, chemical and others Other expenses Sales of products Service income Other income Purchase of raw material, chemical and others Other expenses Service income Other income Other expenses Service income Other income Sales of products Service income Other income Other expenses Other income Service income Other income Other expenses Sales of products Service income Other income Other expenses

Unit : Million Baht 2007 2006 5,193.94 3,413.36 22.14 0.04 13.48 13.79 4,829.09 6,618.47 0.04 0.31 0.29 195.50 357.01 1,296.95 4.19

8.73 9.72 1,515.54 3.77

44.69 8,224.06 2.47

49.63 9,023.53 1.82

1.01 4.10 4.31

1.39 7.06 51.43 0.15 11.13

55.54 0.07 22.98 32.21 2.37 3.00 11,982.39 1.25 2.50 0.31 3.28 15.68 19.29 139.53 33.18 25.92 2.82 -

0.08 0.44 26.79 1.14 (2.17) 8.36 10,283.18 3.34 15.72 2.83 0.90 8.55 18.50 34.03 32.50 6.79 215.15

21 2007 ANNUAL REPORT

Company 22. NPTC Maintenance and Engineering Services Company Limited

Relationship Subsidiary and co-directors

23. NPC Safety and Environmental Services Company Limited

Subsidiary and co-directors

24. TOC Glycol Company Limited

Subsidiary and co-directors

25. Thai Chlorine Chloride Company Limited

Subsidiary and co-directors

26. Thai Oleochemicals Company Limited

Subsidiary and co-directors

27. Thai Ehthanolamines Company Limited

Subsidiary and co-directors

28. Thai Ethoxylate Company Limited

Joint venture and co-directors

29. Thai Fatty Alcohol Company Limited 30. Bangkok Industrial Gas Company Limited

Joint venture of subsidary Co-directors

31. Dhipaya Insurance Public Company Limited 32. Eastern Fluid Transport Company Limited

33. Star Petroleum Refining Company Limited

34. Thai Petroleum Pipeline Company Limited 35. Thai Industrial Gases Public Company Limited

Co-directors 15% of shares held by the Company and co-directors Co-shareholders

Co-shareholders Co-directors

22 PTT CHEMICAL PUBLIC COMPANY LIMITED

Related transaction Service income Other income Other expenses Service income Other income Other expenses Sales of products Service income Other income Service income Other income Service income Other income Service income Other income Service income Other income Other income Sales of products Service income Purchase of raw material, chemical and others Other expenses Other expenses Purchase of raw material, chemical and others Other expenses Sales of products Service income Purchase of raw material, chemical and others Service income Purchase of raw material, chemical and others Other expenses

Unit : Million Baht 2007 2006 7.44 11.52 6.79 229.21 8.60 12.22 8.20 42.95 4,983.89 2,869.33 18.20 0.07 28.41 5.71 5.67 4.28 8.54 9.58 15.54 3.77 6.50 3.36 9.55 3.82 7.74 2.62 2.09 39.24 124.79 0.23 0.08 58.04 2.33 199.36

59.91 0.34 94.53

6.04 0.02 1.85

4.56 3.99 0.04 0.09

853.22 1.47

1,341.48 1.47

0.11 25.84

133

The related party transactions as at December 31, 2007 and 2006 which were presented in the balance sheets consisted of : Consolidated Company

1. PTT Public Company Limited 2. Thai Polyethylene Company Limited 3. Thai Polypropylene Company Limited 4. HMC Polymers Company Limited 5. Thai Plastic and Chemical Public Company Limited 6. TPC Paste Resin Company Limited 7. PTT Aromatics and Refinery Public Company Limited From merger of The Aromatics(Thailand) PLC. and Rayong Refinery PLC. 8. Bangkok Synthetics Company Limited 9.Bangkok Industrial Gas Company Limited 10..Rayong Olefins Company Limited 11.Siam Styrene Monomer Company Limited 12.Star Petroleum Refining Company Limited 13.Vinythai Public Company Limited 14.IRPC Public Company Limited 15.Thai Industrial Gas Public Company Limited 16.Siam Mitsui PTA Company Limited 17.Vopak Holding International B.V. 18.Vopak Asia 19.Pacific Plastics (Thailand) Company Limited 20.PTT Utility Company Limited 21.PTT Phenol Company Limited 22.PTT Polymer Marketing Company Limited 23.PTT Polymer Logistic Company Limited 24. Cognis Thai Company Limited 25.Cognis Japan Ltd. 26.PT Cognis Indonesia 27.Cognis Kimya Sanayi Ticalet A.S. 28.Cognis Korea Ltd. 29.Cognis Oleochemicals (M) 30.Eastern Fluid Transport Company Limited 31.Thai Industrial Gases Public Company Limited

134

Trade accounts receivable December 31, 2007 December 31, 2006

Unit : Million Baht Trade accounts payable December 31, 2007 December 31, 2006

429.12 793.65 367.02 572.94

171.66 718.76 316.00 346.77

7,381.25 -

4,466.15 -

790.50 9.10

434.47 4.77

505.76

423.04

103.24

209.08

164.46 19.60 476.18 282.36 37.89 1,191.63 334.96 7.59 -

132.04 4.18 107.35 244.49 2.85 463.02 627.22 1.06 6.40 -

3.72 6.92 475.75 103.24 48.11 127.01 5.86

5.54 7.00 107.29 209.08 112.95 0.78

2.80 1.02 0.05 2,326.41 0.69 155.21 0.58 0.44 25.35 0.01

0.17 19.57 1,589.28 2.43 117.68 0.50 10.43 39.21 0.05 -

141.22 6.34 -

62.30 0.05 89.51 -

11.10

2007 ANNUAL REPORT

Company 32. PTT Exploration and Production Public Company Limited 33. Other Company Total

Company 1.PTT Public Company Limited 2.Thai Plastic and Chemical Public Company Limited 3.PTT Aromatics and Refinery Public Company Limited From merger of The Aromatics(Thailand) PLC. and Rayong Refinery PLC. 4. Bangkok Synthetics Company Limited 5. Bangkok Industrial Gas Company Limited 6. Rayong Olefins Company Limited 7. Vinythai Public Company Limited 8. IRPC Public Company Limited 9. PTT Utility Company Limited 10. Thai Polypropylene Company Limited 11. PTT Phenol Company Limited 12. PTT Polymer Marketing Company Limited 13. PTT Polymer Logistic Company Limited 14. PTT ICT Solutions Company Limited 15. Eastern Fluid Transport Company Limited 16. Dhipaya Insurance Public Company Limited 17. Cognis Thai Company Limited 18. Cognis Deutscheland 19. HMC Polymer Company Limited 20. Thai Industrial Gases Public Company Limited 21. Other Companies Total

PTT CHEMICAL PUBLIC COMPANY LIMITED

Trade accounts receivable December 31, 2007 December 31, 2006 1.02 8,507.44

5,783.40

(0.76) 8,401.90

(0.93) 5,268.80 Unit : Million Baht

Other accounts receivable

December 31, 2007 8.90

Unit : Million Baht Trade accounts payable December 31, 2007 December 31, 2006

December 31, 2006 10.19

Other accounts payable

December 31, 2007 53.76

December 31, 2006 34.21

1.65

1.61

0.02

0.04

8.98

105.32

0.09 0.02 3.67 0.05 3.09 1.48 0.01 35.41 5.21 0.02

0.01 0.39 0.31 11.55 5.31 16.66 0.69 14.39 4.14 -

0.40 0.39 0.12 5.03 64.65 1.05 27.87 0.42 4.50 -

0.17 3.01 2.62 0.06 37.15 0.99 2.05 -

3.98

10.09 0.01 178.92

(0.31) 186.88

61.95

63.68

135

The Company Unit : Million Baht Company

Trade accounts receivable

December 31, 2007

1.PTT Public Company Limited 2.Thai Polyethylene Company Limited 3.Thai Polypropylene Company Limited 4.HMC Polymers Company Limited 5.Thai Plastic and Chemical Public Company Limited 6.TPC Paste Resin Company Limited 7.Bangkok Polyethylene Public Company Limited 8.PTT Aromatics and Refinery Public Company Limited From merger of The Aromatics(Thailand) PLC. and Rayong Refinery PLC. 9. Bangkok Synthetics Company Limited 10. Bangkok Industrial Gas Company Limited 11. Rayong Olefins Company Limited 12. Siam Styrene Monomer Company Limited 13. Star Petroleum Refining Company Limited 14. Vinythai Public Company Limited 15. IRPC Public Company Limited 16. Thai Tank Terminal Limited 17. NPTC Maintenance and Engineering Services Company Limited 18. NPC Safety and Environmental Service Company Limited 19. TOC Glycol Company Limited 20. PTT Utility Company Limited 21. PTT Polymer Marketing Company Limited 22. PTT Polymer Logistic Company Limited 23. Thai Industrial Gases Public Company Limited 24. Other Companies Total

December 31, 2006

Trade accounts payable

December 31, 2007

December 31, 2006

425.60 793.34 367.02 571.75

171.37 718.62 315.95 346.01

7,380.21 -

4,460.95 -

790.49 9.10

433.92 4.77

951.02

835.67

430.04

355.17

103.24

209.08

161.44 19.60 475.75 276.90 37.59 1,188.71 334.85 11.12

128.93 4.18 107.29 239.25 2.85 453.21 627.22 9.35

3.72 5.04 475.75 103.24 48.11 -

5.53 5.30 107.28 209.08 -

6.43

565.39 1,049.48 0.69 11.01 8,470.89

0.03 486.25 19.44 832.04 0.28 6,098.23

9.59 (0.93) 8,127.97

(0.93) 4,996.29

136

2007 ANNUAL REPORT

Unit : Million Baht Company

Other accounts receivable

December 31, 2007

1.PTT Public Company Limited 2.Thai Plastic and Chemical Public Company Limited 3.Bangkok Polyethylene Public Company Limited 4.PTT Aromatics and Refinery Public Company Limited From merger of The Aromatics(Thailand) PLC. and Rayong Refinery PLC. 5. Bangkok Synthetics Company Limited 6. Bangkok Industrial Gas Company Limited 7. Rayong Olefins Company Limited 8. IRPC Public Company Limited 9. Dhipaya Insurance Public Company Limited 10. Vinythai Public Company Limited 11. Thai Tank Terminal Limited 12. NPTC Maintenance and Engineering Services Company Limited 13. NPC Safety and Environmental Service Company Limited 14. TOC Glycol Company Limited 15. Thai Ethoxylate Company Limited 16. Thai Oleochemicals Company Limited 17. Thai Ehthanolamines Company Limited 18. Thai Chlorine Chloride Company Limited 19. Thai Fatty Alcohols Company Limited 20. Eastern Fluid Transport Company Limited 21. PTT Utility Company Limited 22. PTT Polyethylene Company Limited 23. PTT Phenol Company Limited 24. PTT Polymer Marketing Company Limited 25. PTT ICT Solutions Company Limited 26. PTT Polymer Logistic Company Limited 27. Thai Industrial Gases Public Company Limited 28. Thai Polypropylene Company Limited 29. Other Companies Total

PTT CHEMICAL PUBLIC COMPANY LIMITED

December 31, 2006

Other accounts payable

December 31, 2007

December 31, 2006

6.56

9.52

40.67

20.26

1.65

1.61

0.51

1.57

4.43

0.02

0.04

8.98

105.32

0.08 0.02 0.52

0.01 0.39 0.31 0.57

0.40 8.38 0.39 20.37

0.17 2.62 2.05 3.01 19.62

7.07

15.31

0.87

46.62

11.32 19.47 3.41 11.03 6.75 5.53 2.11 3.67 25.25 3.09 1.48 35.41 3.98 0.05 147.33

19.96 9.73 8.24 4.01 10.21 9.14 0.03 11.55 24.81 5.31 16.52 14.39 0.69 162.31

9.63 1.05 64.65 10.09 167.13

12.68 0.99 0.06 37.00 (0.31) 256.13

137

7. Trade Accounts Receivable As at December 31, 2007, and 2006 the Company and subsidiaries had outstanding balances of trade accounts analyzed by number of months as follows : 7.7. receivable Trade Accounts Accounts Receivable Trade Receivable Unit : Million Baht As at December 31, 2007, and 2006 the CompanyConsolidated and subsidiaries had outstanding balances of trade accounts The Company receivable analyzed by number of months as follows December 31, 2007: December 31, 2006 December 31, 2007 December 31, 2006 Trade accounts receivable – related parties Current 7,870.81 Consolidated 5,763.27 December 31, 2007 December 31, 2006 Overdue Trade accounts – related parties Lessreceivable than 3 months 634.46 19.92 CurrentOver 3 - 6 months 7,870.81 5,763.27 0.18 2.17 OverdueOver 6 - 12 months 0.03 Less than 3 months 634.46 19.92 Over 12 months 0.18 Over 3 6 months 2.17 Trade accounts receivable–related parties-net 8,507.44 5,783.40 Over 6 - 12 months 0.03 Over 12 months Trade accounts receivable–related parties-net 8,507.44 Consolidated 5,783.40 December 31, 2007 December 31, 2006 Trade accounts receivable – others Current 4,009.83 Consolidated 1,593.25 December 31, 2007 December 31, 2006 Overdue Trade accounts – others Lessreceivable than 3 months 11.27 109.64 CurrentOver 3 - 6 months 4,009.83 1,593.25 3.29 6.15 OverdueOver 6 - 12 months 0.58 0.15 Less than 3 months 11.27 109.64 Over 12 months 0.26 0.11 Overreceivable 3 - 6 months 3.29 6.15 Trade accounts – others-net 4,025.23 1,709.30 Over 6 - 12 months 0.58 0.15 Over 12 months 0.26 0.11 Trade accounts receivable – others-net 4,025.23 1,709.30

8. Inventories 8. Inventories

8. Inventories Finished goods Raw materials Work in process Finished goods Total Raw materials Work in process Total

Consolidated December 31, 2007 December 31, 2006 1,444.66 2,824.46 Consolidated 2,714.87 1,137.55 December 31, 2007 December 31, 2006 65.65 10.35 1,444.66 2,824.46 3,972.36 4,225.18 2,714.87 1,137.55 65.65 10.35 3,972.36 4,225.18

Unit : Million Baht 7,834.26The Company 6,070.92 December 31, 2007 December 31, 2006 634.46 20.72 7,834.26 6,070.92 2.17 0.16 634.46 20.72 6.43 2.17 0.16 8,470.89 6,098.23 Unit : Million6.43 Baht 8,470.89The Company 6,098.23

December 31, 2007

December 31, 2006 Unit : Million Baht 245.55The Company 266.10 December 31, 2007 December 31, 2006 5.02 245.55 2.02 5.02 2.02 252.59 252.59

105.73 266.10 4.89 105.73 0.06 4.89 376.78 0.06 376.78

Unit : Million Baht The Company December 31, 2007 December 31, 2006 Unit : Million Baht 800.74 1,552.78 The Company 2,368.56 1,066.33 December 31, 2007 December 31, 2006 9.09 10.35 800.74 1,552.78 3,178.39 2,629.46 2,368.56 1,066.33 9.09 10.35 3,178.39 2,629.46

138

2007 ANNUAL REPORT

9. Materials and supplies

9. Materials and Supplies

Spare parts Supplies Spare parts and supplies in transit Total Less Allowance for obsolescence

Consolidated December 31, 2007 December 31, 2006 1,882.83 1,600.96 115.30 122.11 19.91 0.60 1,723.67 2,018.04 (0.35) (0.35) 1,723.32 2,017.69

Unit : Million Baht The Company December 31, 2007 December 31, 2006 1,664.60 1,422.66 102.61 122.11 1.54 0.59 1,768.75 1,545.36 (0.35) (0.35) 1,768.40 1,545.01

10. Other Current Asset 10. Other Current Assets

Consolidated December 31, 2006 December 31, 2007 Other accounts receivable â&#x20AC;&#x201C; net Refundable value added tax Prepaid insurance and other expenses Prepayment of supplies Accrued interest income and others Unrealized purchase tax Account Receivable Swap Contract Others Total

27.64 218.52 170.22 91.67 261.29 547.08 56.52 35.53 1,408.47

26.73 502.55 185.40 345.95 164.45 398.31 534.07 2,157.46

Unit : Million Baht The Company December 31, 2007 December 31, 2006 13.50 15.57 107.60 105.50 44.49 345.95 139.91 117.81 419.00 347.00 56.52 3.96 501.02 784.98

1,432.85

28 PTT CHEMICAL PUBLIC COMPANY LIMITED

139

11. Investments in Equity MethodMethod 11. Investments in Equity

11.1 Information of subsidiaries and joint venture of the Company is as follows : Company

TOC Glycol Company Limited (TOCGC) Thai Ethanolamines Company Limited (TEA) Thai Choline Chloride Company Limited (TCC) Thai Oleochemicals Company Limited (TOL) Thai Tank Terminal Limited (TTT) NPTC Maintenance & Engineering Services Company Limited (NPTC) NPC Safety and Environmental Service Company Limited (NPC S&E) Bangkok Polyethylene Public Company Limited (BPE) PTT Polyethylene Company Limited (PTTPE)

Joint Venture : Thai Ethoxylate Company Limited (TEX)

140

Nature of business

Manufacturing and distributing petrochemical products Manufacturing and distributing petrochemical products Manufacturing and distributing petrochemical products Manufacturing and distributing petrochemical products Services for the storage Services for the storage Maintenance factory and services engineering Safety and environmental services Manufacturing and distributing petrochemical products Manufacturing and distributing petrochemical products

Manufacturing and distributing petrochemical products

Shareholding Percentage December 31, 2007 December 31, 2006

100.00

51.00

60.00

100.00

50.00

2007 ANNUAL REPORT

11.2

Information of associates of the Company is as follows : Company

Associates : PTT Phenol Company Limited (PPCL) PTT Utility Company Limited (PTTUT) PTT Polymer Marketing Company Limited (PTTPM) Vinythai Public Company Limited (VNT) Eastern Fluid Transport Company Limited (EFT) PTT ICT Solutions Company Limited (PTTICT)

PTT CHEMICAL PUBLIC COMPANY LIMITED

Nature of business

Shareholding Percentage December 31, 2007 December 31, 2006

Manufacturing and distributing petrochemical products Generate and supply electricity, steam and water Marketing of polymer products Manufacturing and distributing petrochemical products Petrochemical pipeline system

30.00

40.00

25.00

24.98

15.00

Services for Information Communication and Technology

20.00

141

142

2007 ANNUAL REPORT

Investments

Associates PTT Phenol Company Limited PTT Utility Company Limited PTT Polymer Marketing Company Limited Vinythai Public Company Limited Eastern Fluid Transport Company Limited PTT ICT Solutions Company Limited Total 30.00 40.00 25.00 24.98 22.65 20.00

2,700.00 2,542.50 40.00 7,111.16 10.00 150.00

3,202.20 6,859.00

40.00 7,111.16

10.00

150.00

20.00

22.65

25.00 24.98

30.00 40.00

30.00 7,043.91

2.26

10.00 3,297.39

960.66 2,743.60

30.00 5,166.65

2.26

10.00 3,297.39

810.00 1,017.00

32.04 6,904.77

8.33

37.55 3,359.97

851.49 2,615.39

29.66 5,036.30

7.43

15.50 3,273.54

763.18 946.99

Unit : Million Baht Shareholding Percentage Cost Method Equity Method Paid-up Capital December 31, 2007 December 31, December 31, December 31, December 31, 2007 December 31, December 31, December 31, December31, 2007 December 31,2007 2007 December 2007 December 31,2007 2007 December 31,2006 2006 December 31,2006 2006 December31, 31,2006 2006 December 31,2006 2006

Consolidated (Equity method)

11.3

The Company (Cost Method)

Investments in subsidiaries TOC Glycol Company Limited Thai Ethanolamines Company Limited Thai Choline Chloride Company Limited Thai Oleochemicals Company Limited NPC Safety and Environmental Service Company Limited NPTC Maintenance & Engineering Services Company Limited Thai Tank Terminal Limited Bangkok Polyethylene Public Company Limited PTT Polyetheylene Company Limited Investments in associates PTT Phenol Company Limited PTT Utility Company Limited PTT Polymer Marketing Company Limited Vinythai Public Company Limited Eastern Fluid Transport Company Limited PTT ICT Solutions Company Limited Investment in joint venture Thai Ethoxylate Company Limited Total

Unit : Million Baht Paid-up Capital Shareholding Percentage Cost Method December 2006 December December 31, 2006 December December31, 31, 2007 2007 December 31, 2007 2007 December December 31, 31, 2007 2007 December December31, 31, 2006 December 31, 31, 2006 December31, 31,2006 2006 5,395.00

5,395.00

100.00

5,395.00

450.00

225.00

100.00

450.00

225.00

280.00

140.00

100.00

280.00

140.00

2,400.00

1,800.00

100.00

2,400.00

1,800.00

105.00

15.00

100.00

105.00

15.00

42.12 900.00

60.00 51.00

25.27 459.00

1,700.00 15,100.00

1,700.00 5,900.00

100.00 100.00

3,663.50 15,700.00

3,663.50 6,500.00

3,202.20 6,859.00

2,700.00 2,542.50

30.00 40.00

960.66 2,743.60

810.00 1,017.00

40.00 7,111.16

25.00 24.98

10.00 3,297.39

10.00 150.00

15.00 20.00

1.50 30.00

420.00

50.00

210.00 35,730.92

210.00 23,598.66

PTT CHEMICAL PUBLIC COMPANY LIMITED

143

On June 8, 2006 a subsidiary company had invest in Thai Fatty Alcohols Company Limited, a joint venture company, which operate in Oleochemical products such as fatty alcohols from natural oil and fats which are raw fatty alcohols and refined fatty alcohols including derivatives of fatty alcohols. Ratio of investment in this subsidiary company is 50 percent (2.10 million shares, par value Baht 100 per share). A subsidiary company had paid shares 100 percent in par value. Therefore, its classified as investment in joint venture which record at cost in a subsidiary companyâ&#x20AC;&#x2122;s financial statement as at December 31, 2007 amounted Baht 210 million. On December 28, 2007, Toyo-Thai Corporation Company Limited has been sold all investment in NPTC Maintenance and Engineering Company Limited 0.17 million shares or ratio of investment is 40 percent to PTT Public Company Limited. 12. OtherLong-term Long-termInvestments Investments 12. Other Consolidated December 31, December 31, 2007 2006 Other Investment Alliance Petrochemical Investment (Singapore) Pte. Ltd. (shareholding percentage of the Company is 16.67%) Available for Sales Investment in mutual fund Unrealized gain(Loss) from Investment in mutual fund Total

Unit : Million Baht The Company December 31, December 31, 2007 2006 2007

290.24

300.45 0.78 591.47

290.24

300.45 0.78 591.47

On March 13, 2007, a mutual fund had been closed because the number of investor didnâ&#x20AC;&#x2122;t follow the regulation of the mutual fund. The Company had been already refund from the said investment in mutual fund in full amount. In August 2007, the Company already sold other investment in mutual fund(remainder amount of investment in available for sales) in full.

144

33 2007 ANNUAL REPORT

13. Long-term to to Related Party 13. Long-termLoan Loan Related Party

Short-term Short-term Unit : Million Baht The Company 4,400.00 4,400.00

Balance as at December 31, 2006 Increased (Decreased) during period Short-term Loan to Related Party

The Company has provided a short term loan to a subsidiary to use for payment of construction and related operating expenses. The interest is fixed rate at 6% per annum and guaranteed by such subsidiaryâ&#x20AC;&#x2122;s promissory note, used as evidence for the said loan. Long-term

Balance as at December 31, 2006 Increased during period Decreased during period Balance as at December 31, 2007 Less : Current portion of long term to related party Long-term Loan to Related Party-net

Unit : Million Baht The Company 4,975.00 4,240.00 (3,052.23) 6,162.77 6,162.77

The Company entered into a loan agreement with a subsidiary company whereby the Company provide a credit facility of Baht 5,300 million. The loan is semi-annually repayable in 11 instalments. The 1st - 10th installments are repayable at the rate 9.09% of total loan amount and the 11th installment is repayable at the rate 9.10% of total loan amount. The first installment will be paid starting in September 2007. Interest is monthly payable at the fixed rate of 4.8% per annum. The said loan has been amending to quarterly interest payable since January 1, 2008. On December 31, 2007, the subsidiary had made the prepayment of such loan of Baht 2,600.00 million which comply with the loan agreement No.7.3 the voluntary prepayment of the loan. As at December 31, 2007 the outstanding of the loan amounted Baht 1,922.77 million. On August 31, 2007, the Company entered into a loan agreement with a subsidiary company whereby the Company provide a credit facility of Baht 26,700 million classified by purpose to 3 facilities as follow :

PTT CHEMICAL PUBLIC COMPANY LIMITED

145

First facility for construction. The loan is quarterly repayable in 20 instalments. The first installment will be paid starting in June 2010. Interest is quarterly payable, at the rate that reflects the lender’s cost of fund and the first anniversary shall not exceed 6% per annum. Second facility for construction. The loan is quarterly repayable in 19 instalments. The first installment will be paid starting in September 2010. Interest is quarterly payable, at the rate that reflects the lender’s cost of fund and the first anniversary shall not exceed 6% per annum. Third facility for working capital. The loan shall repay on the date mutually agreed between the borrower and the lender and the borrower may re-borrow the loan which is repaid. The loan shall be repaid in full in March 2015. Interest is monthly payable or as agreed by the borrower and the lender, at the rate of MLR minus 1.75% per annum. As at December 31, 2007 the outstanding of the loan amounted Baht 3,700 million. On September 5, 2007, the Company entered into a loan agreement with a subsidiary company whereby the Company provide a credit facility of Baht 4,305 million classified by purpose to 3 facilities as follow : First facility for construction. The loan is semi-annually repayable in 8 instalments. The first installment will be paid starting in September 2010. Interest is quarterly payable, at the rate that reflects the lender’s cost of fund and the first anniversary shall not exceed 6% per annum. Second facility for loan repayment or prepayment. The loan is semi-annually repayable in 8 instalments. The first installment will be paid starting in September 2010. Interest is quarterly payable, at the rate that reflects the lender’s cost of fund and the first anniversary shall not exceed 6% per annum. Third facility for working capital. The loan shall repay on the date mutually agreed between the borrower and the lender and the borrower may re-borrow the loan which is repaid. The loan shall be repaid in full in March 2014. Interest is monthly payable or as agreed by the borrower and the lender, at the rate of MLR minus 1.75% per annum. As at December 31, 2007 the outstanding of the loan amounted Baht 540 million.

146

2007 ANNUAL REPORT

PTT CHEMICAL PUBLIC COMPANY LIMITED

147

(22,055.31) (2,874.97) 32.68 (24,897.60)

34,555.09

1,856.25

2,475.11

At December 31, 2007

40,105.90

56,610.40 29.20 8,398.58 (34.68) 65,003.50

1,856.25 131.65 487.21 2,475.11

At December 31, 2006 Acquisitions Transfer / change category Sales and dispose At December 31, 2007 Accumulated Depreciation At December 31, 2006 Depreciation for the year Accumulated depreciation on disposal Transfer / change category At December 31, 2007 Net Book Value in Historical Cost At December 31, 2006

Cost / Revaluation

Land

Olefins plant, machinery and equipment

14. Property, Plant Equipment - net 14. Property, Plant andand Equipment-Net Consolidated Consolidated

686.63

344.38

(429.04) (49.81) (478.85)

773.42 392.06 1,165.48

207.03

169.01

(568.59) (73.83) 278.76 0.35 (363.31)

737.60 69.81 41.77 (278.84) 570.34

906.57

860.61

(939.39) (98.94) 0.01 (1,038.32)

1,800.00 96.61 48.32 (0.04) 1,944.89

Pipeline and Factory equipment metering and tools Buildings

154.90

154.94

(205.48) (10.94) (216.42)

360.42 0.38 10.52 371.32

Leasehold improvement

13.48

3.65

(37.55) (1.14) (38.69)

41.20 1.91 9.06 52.17

Buildings improvement

187.29

141.75

(491.32) (61.55) 151.51 (0.35) (401.71)

633.07 69.43 38.28 (151.78) 589.00

Fixture and equipment

227.84

202.04

(167.74) (73.45) 72.73 (168.46)

369.78 114.06 (87.54) 396.30

30,757.03

13,503.72

13,503.72 26,801.91 (9,425.80) (122.80) 30,757.03

Construction in Vehicles progress

75,721.78

51,791.44

(24,894.42) (3,244.63) 535.69 (27,603.36)

76,685.86 27,314.96 (675.68) 103,325.14

Total

Unit : Million Baht

148

2007 ANNUAL REPORT

Cost / Revaluation At December 31, 2006 Acquisitions Transfer / change category Sales and dispose At December 31, 2007 Accumulated Depreciation At December 31, 2006 Depreciation for the year Accumulated depreciation on disposal Transfer / change category At December 31, 2007 Net Book Value in Historical Cost At December 31, 2006 At December 31, 2007

The Company

41,289.02 11.38 7,908.78 (28.47) 49,180.71

(19,105.03) (2,139.57) 27.27 (21,217.33) 22,183.99 27,963.38

488.70 64.14 479.41 1,032.25

488.70 1,032.25

Land

Olefins plant, machinery and equipment

338.24 680.80

(428.96) (49.50) (478.46)

767.20 392.06 1,159.26

Pipeline and metering

146.53 149.31

(564.62) (63.49) 278.76 0.35 (349.00)

711.15 24.21 41.77 (278.82) 498.31

Factory equipment and tools

500.51 497.34

(408.36) (51.30) 0.01 (459.65)

908.87 48.16 (0.04) 956.99

Buildings

136.52 137.75

(191.68) (9.67) (201.35)

328.20 0.38 10.52 339.10

Leasehold improvement

0.97 11.42

(37.15) (0.53) (37.68)

38.12 1.91 9.07 49.10

Buildings improvement

110.16 142.76

(425.48) (49.42) 136.32 (0.35) (338.93)

535.64 45.44 37.00 (136.39) 481.69

Fixture and equipment

157.82 176.80

(135.49) (58.58) 70.15 (123.92)

293.31 91.46 (84.05) 300.72

Vehicles

7,733.20 2,994.73

7,733.20 4,310.88 (8,926.77) (122.58) 2,994.73

Construction in progress

31,796.64 33,786.54

(21,296.77) (2,422.06) 512.51 (23,206.32)

53,093.41 4,549.80 (650.35) 56,992.86

Total

Unit : Million Baht

Depreciation for the year ended December 31, 2007 and included under cost of sales and services in the consolidated financial statements amounted to Baht 3,063.03 million(the Company : Baht 2,296.43 million ) and selling and administrative expenses in the consolidated financial statements amounted to Baht 181.61 million (the Company : Baht 125.63 million). Building, plant, machinery and equipments amounting to Baht 12,000.00 million are pledged as collateral for debentures-baht currency amounted to Baht 2,057.14 million. Building and machinery of a subsidiary amounting to Baht 1,450.35 million are pledged as collateral for debentures-baht currency amounted to Baht 873.17 million. Building and machinery of joint venture amounting to Baht 286.00 million are pledged as collateral for debentures-baht currency amounted to Baht 329.00 million. Book value of cars and furniture fixture and equipment (computers and photocopying machines) as at December 31 , 2007 , amounted to Baht 218.18 million and Baht 54.29 million (the Company : Baht 173.82 million and Baht 41.86 million) are under financial lease agreement. The Company and a subsidiary has been change in accounting policy for property, plant and equipment from the revaluation to historical cost that disclosed in Note.4 , changing in amount as follow : Consolidated

Unit : Million Baht The Company

Asset decreased Olefins plant, machinery and equipment

21,488.06

20,509.46

570.06

Plant building

56.13

54.44

Office building

52.70

198.66

198.40

10,311.18

10,072.30

347.86

Plant building

20.72

20.07

Office building

19.97

102.92

102.84

11,562.96

10,822.02

Pipeline and metering

Leasehold improvement and Building improvement Accumulated Depreciation decreased Olefins plant, machinery and equipment Pipeline and metering

Leasehold improvement and Building improvement Asset-net decreased PTT CHEMICAL PUBLIC COMPANY LIMITED

149

150

2007 ANNUAL REPORT

15. Intangible Assets - Net

269.30 15.14 27.93 312.37 (113.56) (31.53) (145.09) 155.74 167.28

819.15 819.15

(315.35) (63.07) (378.42)

503.80

440.73

As at December 31, 2006 Additions Transfer / change category Additions As at December 31, 2007 Accumulated amortisation As at December 31, 2006 Amortization for the period Transfer / change category Additions As at December 31, 2007

As at December 31, 2006

As at December 31, 2007

Net Book Value

Computer Software

License fee for Polyethylene Plastics production process

15. Intangible Assets-Net Consolidated Consolidated

15.60

17.31

(7.74) (1.71) (9.45)

25.05 25.05

Right of use pipe rack

102.71

108.58

(5.67) (6.96) (12.63)

114.25 1.09 115.34

Right of use Jetty

1,679.58

884.12

884.12 795.46 1,679.58

Right of use Other

2,553.47

2,865.20

(77.93) (311.73) (38966)

2,943.13 2,943.13

Goodwill

4,959.37

4,534.75

(520.25) (415.00) (935.25)

5,055.00 810.60 29.02 5,894.62

Total

Unit : Million Baht

On March 8, 2006 the Company had transferred a right of an additional jetty for loading liquid cargo to the Industrial Estate Authority of Thailand in net book value of the transfer date, amounting to Baht 72.95 million, and the Company agree to pay an advance for the use of waterfront of the jetty and the compensation benefit amounting to Baht 34 million and Baht 8.39 million, respectively. Thus, the Industrial Estate Authority of Thailand has given an exclusive operational right of the said jetty to the Company for the period from March 8, 2006 to September 30, 2022. The Company recorded the right transfer and the 2 related items of expenses as the right to use jetty in totaling amount Baht 115.34 million and has amortized as expense under the rightful period for the period of 16 years and 7 months. The Company Unit : Million Baht

Cost

As at December 31, 2006 Additions Transfer / change category As at December 31, 2007

Accumulated Amortization As at December 31, 2006 Amortization for the period Transfer / change category As at December 31, 2007

Net Book Value

As at December 31, 2006 As at December 31, 2007

PTT CHEMICAL PUBLIC COMPANY LIMITED

License fee for Polyethylene plastics production process

Computer Software

Total

680.18 680.18

220.38 7.58 27.94 255.90

900.56 7.58 27.94 936.08

(241.34) (57.01) (298.35)

(92.85) (24.32) (117.17)

(334.19) (81.33) (415.52)

438.84 381.83

127.53 138.73

566.37 520.56

151

16. Income Deferred Income 16. Income TaxTax andand Deferred Income Tax Tax

Applicable tax rates for the Company is as follows : Tax rates 30

Income tax under the Revenue Code - The Company Tax Exempt of net income from Board of Investment Tax Exempt of net income from Board of Investment for the period of five years

0 15

Income tax recognised in the consolidated and the Companyâ&#x20AC;&#x2122;s statements of income for the year ended December 31, 2007 and 2006 are as follows:

31 December 2007 Income tax under the Revenue Code Current income tax Add Deferred income tax

2,271.16 16.83 2,287.99

31 December 2007 Income tax under the Revenue Code Current income tax Add Deferred income tax

152

Consolidated

2,138.62 16.83 2,155.45

Unit : Million Baht 31 December 2006 3,122.66 2.53 3,125.19

The Company

Unit : Million Baht 31 December 2006 3,000.56 2.53 3,003.09

2007 ANNUAL REPORT

Deferred income taxes presented in the consolidated and the Companyâ&#x20AC;&#x2122;s balance sheet as at Deferred income presented the consolidated and the Companyâ&#x20AC;&#x2122;s balance sheet as at December 31, 2007taxes and 2006 are asinfollows: December 31, 2007 and 2006 are as follows: Deferred tax assets : Deferredtaxtaxunder assetsthe: Revenue Code Income Income tax under31, the2006 Revenue Code As at December As atIncome December tax 31, 2006 Add Add Income tax As at December 31, 2007 As at December 31, 2007

Deferred tax liabilities: Deferred tax liabilities: Income tax under the Revenue Code Income tax under the Revenue Code As 31, 2006 2006 As atat December December 31, tax Add Add Income Income tax As 31, 2007 2007 As atat December December 31,

Unit : Million Baht UnitThe: Million Baht Company The Company

Consolidated Consolidated

0.57 0.570.24 0.24 0.81 0.81

0.57 0.57 0.24 0.24 0.81 0.81

Unit : Million Baht Unit : Million Baht The Company The Company

Consolidated Consolidated

623.38 623.38 17.07 17.07 640.45 640.45

Deferred assets mainly mainly comprised compriseddifferent differentbetween betweenthethefairfairvalue valueof ofderived derived assets. Deferred Deferred tax tax assets assets. Deferred tax tax liabilities comprised accumulated accumulateddepreciation depreciationofofadjusted adjusteduseful usefullifelifeof ofplant plant property liabilities mainly mainly comprised property andand equipment financial lease. lease. equipment and financial 17. 17. Non-current Assets 17. Non-current Non-current Assets

Deferred expenses Deferred Non-consumable supply Non-consumable supply for production production process for process Deposits and others Deposits and others Total Total

PTT CHEMICAL PUBLIC COMPANY LIMITED

Consolidated Consolidated December December31,31,2007 2007 December December31,31,2006 2006 351.29 445.69 351.29 445.69 159.16 159.16 38.88 38.88 549.33 549.33

159.16 159.16 25.68 25.68 630.53 630.53

: Million UnitUnit : Million BahtBaht TheThe Company Company December 31, 31, 20072007 December 31, 2006 December December 31, 2006 148.95 108.65 148.95 108.65 159.16 159.16 22.02 22.02 330.13 330.13

159.16 159.16 23.1023.10 290.91 290.91

153

Liabilities from Financial Lease 18.18. Liabilities Financial 18. Liabilities from from Financial LeaseLease

Unit : Million Unit : Baht Million Baht The Company Consolidated The Company Consolidated December 31, 31, December 31, 31,December 31, 31,December 31, December December December December 31, 2007 2007 2006 2006 2007 2007 2006 2006

Liabilities fromfrom finance leasesleases Liabilities finance - - NotNot laterlater thanthan 1 year1 year - - LaterLater thanthan 1 year and not than 5than years 1 year andlater not later 5 years Less: Future finance charges on finance leases Less: Future finance charges on finance leases Present value of liabilities from finance leases Present value of liabilities from finance leases

111.53111.53 225.98225.98 (30.58)(30.58) 306.93 306.93

113.95113.95 179.93179.93 (24.26)(24.26) 269.62 269.62

91.33 91.33 174.87 174.87 (23.15) (23.15)

243.05

101.11 101.11 145.83 145.83 (20.33) (20.33) 226.61 226.61

Unit : Million Baht Unit : Million Baht The Company Consolidated Consolidated The Company December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2007 2006 2007 2006 2007 2006 2007 2006 Present value of liabilities from finance leases value of liabilities from finance leases - Present Current liabilities Current liabilities - - Non-current liabilities - value Non-current liabilities Present of liabilities from finance leases Present value of liabilities from finance leases 19. LONG-TERM 19. Long-term Loans LOANS

19. LONG-TERM LOANS

Long â&#x20AC;&#x201C; Term Loans Long-term Loans Less:Long Current portion â&#x20AC;&#x201C; Term Loansof long-term loans Long-term loans, portion net of long-term loans Less: Current

98.10 208.83 98.10 306.93208.83 306.93

102.35 167.27102.35 269.62167.27 269.62

80.40 162.65 80.40 243.05 162.65 243.05

90.61 136.00 90.61 226.61 136.00 226.61

Unit : Million Baht Consolidated The CompanyUnit : Million Baht Company31, December 31, Consolidated December 31, December 31, TheDecember 2007 2006 December 31, December 31, 2007 December 31, 2006December 31, 4,497.01 4,871.112006 2,727.272007 3,000.00 2006 2007 (1,089.00) (545.45)2,727.27 (272.73)3,000.00 4,497.01 (1,188.86) 4,871.11 3,408.01 2,181.82(545.45) 2,727.27 (272.73) 3,682.25 (1,089.00) 3,682.25 (1,188.86)

Long-term Long-term loansloans, in thenet consolidated financial statements3,408.01 as at December3,682.25 31, 2007 amounted to2,181.82 Baht 4,497.01 2,727.27 million is long-term The Company and subsidiaries as follows :31, 2007 amounted to Baht 4,497.01 Long-term loans loans in theofconsolidated financial statementsdetails as at December Onmillion June 6,is 2005, Thai loans TankofTerminal Limitedandentered into a details loan agreement long-term The Company subsidiaries as followswith : a commercial bank, providing loanTank facility of Baht 450 entered million into for the purpose of construction of fluid bank, On Junea 6,long-term 2005, Thai Terminal Limited a loan agreement with a commercial loading/unloading facilities and buffer tank farm. On July 4, 2005, a subsidiary had already drawn down the providing a long-term loan facility of Baht 450 million for the purpose of construction of fluid full amount of above loan. In addition, loan agreement stipulates the covenants relating to various matters, loading/unloading facilities and buffer tankInterest farm. On 4, 2005, a subsidiary drawn down the including the maintenance of financial ratios. rateJuly of loan Baht 450 million ishad THBalready Fix plus 0.3 per full amount of aboveBaht loan.30 Inmillion addition, loan agreement covenants1, relating annum, loan repayment per quarterly from Junestipulates 1, 2006 totheDecember 2009. to various matters, including the maintenance of financial ratios. Interest rate of loan Baht 450 million is THB Fix plus 0.3 per annum, loan repayment Baht 30 million per quarterly from June 1, 2006 to December 1, 2009.

154

2007 ANNUAL REPORT

On June 20, 2007, the said subsidiary entered into a loan agreement with a commercial bank, providing a long-term loan facility of Baht 1,000 million for the purpose of construction of fluid loading/unloading facilities and buffer tank farm. On June 26, 2007, a subsidiary had already drawn down the amount of Baht 150 million. In addition, loan agreement stipulates the covenants relating to various matters, including the maintenance of financial ratios. Interest rate of this loan is THB Fix 3 months plus 0.3 per annum, loan repayment by quarterly from June 1, 2007 to June 1, 2012. As at December 31, 2007, the subsidiary has entered into interest rate swap agreements in order to hedge the interest rate risk from the loans above, whereby the interest rate is swapped to a rate of 4.53 % and 5.12 % per annum, respectively. On November 12, 2004, Bangkok Polyethylene Public Company Limited which is the Company’s subsidiary entered into a loan agreement with a local commercial bank, providing a long-term loan facility of US$ 22.4 million and Baht 369.2 million carry interest rate at LIBOR plus a fixed percentage per annum and interest rate of fixed deposit plus a fixed percentage per annum, respectively. The loan principle is repayable in 7 semi-annually, starting from May 31, 2006. The said loan is secured by the subsidiary’s Building and machinery. In addition, loan agreement stipulates the covenants relating to various matters. Joint venture company secured long-term loan from financial institution that bears interest rate of 5.00% per annum and shall be repaid on a quarterly basis. The Joint venture company shall repay the principal amount in 14 semi-annual instalments in accordance with the repayment schedule as specified in the loan agreement. The loan repayment will be starting from August 31, 2008. The said loan is secured by the Joint venture company’s machinery of Baht 286.00 million. As at December 31, 2007, long-term loans of the Company as follow : a) Foreign currency loan : Loan under the Revolving Syndicated Loan for a credit facility of USD 135 million is due for repayment on each period of interest payment or final period payable in September 2010. Interest is payable quarterly or six-monthly at the rate of LIBOR plus 0.43% per annum. The Company has to comply with certain conditions as specified in the loan agreement. b) Baht loan On September 9, 2005, the Company entered into a loan agreement with a commercial bank for credit facilities of Baht 3,000 million. The drawdown period is due within 18 months from the date of the agreement. The loan agreement is semi-annually repayable in 11 installments. The first installment starts in the 24th month from the date of the agreement. Interest is payable quarterly equal to the average rate of six-month fixed deposit of the big 4 of commercial banks plus 2.25% per annum in the first to second year and at the rate of equal to the average rate of six-month fixed deposit of the big 4 commercial banks plus 2.50% per annum in the third to seventh year. On September 28, 2006, the Company entered into the first amendment of loan agreement date September 9, 2005 , for amended drawn down period to due within December 2006 and amended for PTT CHEMICAL PUBLIC COMPANY LIMITED

155

interest from the average rate of six-month fixed deposit of the big 4 of commercial banks to the average rate of three-month fixed general deposit of the Government saving bank. As at December 31, 2007 The Company had already drawn down all. 20. Debentures 20. Debentures

Unit : Million Baht Consolidated / The Company December 31, 2007 December 31, 2006 6,926.85 3,814.28 10,116.40 10,813.58 17,043.25 14,627.86 (1,245.67) (1,750.58) 15,797.58 12,877.28

Debentures – Bath currency Debentures – Foreign currency Total Less : Current portion due within one year Debentures – net

The Company issued three lots of 10 million secured and amortizing debentures with a face value of Baht 1,000 each, totaling Baht 10,000 million. The first lot amounted to Baht 5,000 million, the second lot amounted to Baht 3,000 million and the third lot amounted to Baht 2,000 million with the interest changed at the fixed rate of 2.70% per annum, 3.30% per annum and average rate of the highest fixed deposit rate for six-month plus 2.50% per annum, respectively, payable every 6 months, to be redeemed on September 24, 2004, September 24, 2005 and September 24, 2006, respectively. The debentures are secured by a mortgage of Olefins plant, machinery and equipment, the assignment of the land lease agreement with Industrial Estate Authority of Thailand, and the assignment of insurance proceeds. The Company has to comply with certain conditions as specified. The Company issued 3.00 million unsecured unsubordinated and amortizing debentures with a face value of Baht 1,000 each, totaling Baht 3,000 million with the interest charged at the fixed rate of 5.15% per annum, payable every 6 months, to be redeemed in to 2007, and have a grace redemption period of 2.5 years since year 2002. The conditions of the debenture offering stipulate restriction covenants with which the Company must comply, such as not creating any lien on the Company’s assets, not paying dividends if the Company is default in payment of interest, and the maintenance of certain financial ratios. On April 4, 2007 the Company had already paid the said debenture in fully. The Company issued 30,000 unsecured unsubordinated debentures with a face value of US$10,000 each, sold at discounted price of 99.469% of the face value totalling US$ 298.41 million with the interest charged at the fixed rate of 5.50% per annum, payable every 6 months and have a redemption period of 10 years, to be redeemed on June 24, 2015. On October 10, 2007, the Company issued two lots of 4.9 million unsecured unsubordinated with a face value of Baht 1,000 each, totalling Baht 4,900 million. The first lot amounted to Baht 2,100 million and the second lot amounted to Baht 2,800 million with the interest charged at the fixed rate of 4.58% per annum and 5.50% per annum respectively, payable every 6 months, to be redeemed on October 10, 2012 and October 10, 2017, respectively. 156

2007 ANNUAL REPORT

21. Liabilities 21. Other CurrentCurrent Liabilities 21. Other Other Current Liabilities 21. Other Current Liabilities

Other accounts payable Other accounts payable Other accounts payable Accounts payable – forward contracts Accounts payable – forward contracts Accounts Unrealizedpayable sales tax– forward contracts Unrealized sales tax Value addedsales tax tax Unrealized Value added tax Value added tax Advance Income Advance Income Advance Income Accrued expenses Accrued expenses Accrued expenses Withholding tax payable Withholding tax payable Withholding tax payable Total

Total Total

Consolidated Consolidated Consolidated December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006 December 31, 2007 December 314.14 515.4131, 2006 314.14 515.41 314.14 515.41292.65 292.65 292.6512.2412.24 12.24 106.58 106.58 106.5823.9923.99 23.99 522.93 406.14522.93 406.14 522.93 406.14 197.27 149.38 197.27 149.38 197.27 149.38 1,350.98 1,189.48

1,350.98 1,350.98

1,189.48 1,189.48

Unit : Million Baht Unit : Million Baht The Company Unit : Million Baht The Company The Company December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006 December 242.4831, 2007 December 400.3231, 2006 242.48 400.32 242.48400.32288.40100.07288.40 100.07 288.40 100.0717.82 17.82 17.82 269.04 96.57269.04 96.57 269.04 96.57 176.70 140.05 176.70 140.05 176.70 140.05 994.44 737.01

994.44 994.44

737.01 737.01

22. Provident Fund 22. Before Provident Fund Before year year 1997, 1997, the the Company Company and and subsidiary subsidiary established established non-funded non-funded provident provident funds funds covering covering all all of of their their permanent employees. Benefits are payable upon retirement, death or resignation. The Company and Before year 1997, the Company and subsidiary established non-funded provident funds covering all of permanent employees. Benefits are payable upon retirement, death or resignation. The Company their and subsidiary sets aside provision for provident fund at amounts equivalent to certain percentages of employees’ permanent employees. Benefits are payable upon retirement, death or resignation. The Company and subsidiary sets aside provision for provident fund at amounts equivalent to certain percentages of employees’ basic depending on of plus computed on cumulative subsidiary sets aside provision for provident fund at amounts equivalent to certainmonthly percentages of employees’ basic salaries, salaries, depending on length length of employment, employment, plus interest interest computed monthly on the the cumulative balance of the provision at the rate equivalent to interest rate of fixed deposit accounts at commercial banks. basic salaries, depending on length of employment, plus interest computed monthly on the cumulative balance of the provision at the rate equivalent to interest rate of fixed deposit accounts at commercial banks. balance of the provision at the rate equivalent to interest rate of fixed deposit accounts at commercial banks. As at December 31, 2007, and December 31, 2006 the Company and subsidiary present provident fund As at December 31, 2007, and December 31, 2006 the Company and subsidiary present provident fund in in the the consolidated financial statements, amounted to Baht 13.44 million and Baht 12.25 million (the Company As at December 31, 2007, and December 31, 2006 the Company and subsidiary present provident fund in consolidated financial statements, amounted to Baht 13.44 million and Baht 12.25 million (the Companythe:: Baht and 7.66 ).). to Baht 13.44 million and Baht 12.25 million (the Company : consolidated financial statements, amounted Baht 8.72 8.72 million million and Baht Baht 7.66 million million Baht 8.72 million and Baht 7.66 million ). 23. 23. Other Other Non-current Non-current Liabilities Liabilities 23. Other Non-current Liabilities 23. Other Non-current Liabilities 22. Provident 22. Provident FundFund

Service fee received in advance Service fee received in advance Service feeforreceived in advance Provision liability arising Provision for liability arising Provision liability arising from taxforassessment from tax assessment from taxfrom assessment Advances fluid loading/unloading Advances from fluid loading/unloading facilitiesfrom andfluid bufferloading/unloading tank farm service users Advances facilities and buffer tank farm service users facilities and buffer tank farm service users Total Total Total

PTT CHEMICAL PUBLIC COMPANY LIMITED

Consolidated Consolidated Consolidated December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006 December 31,- 2007 December 0.2831, 2006 0.28 0.28 13.35 13.35 13.35

13.35 13.35 13.35

32.64 32.64 32.64 45.99 45.99 45.99

6.47 6.47 6.47 20.10 20.10 20.10

46 46 46

Unit : Million Baht Unit : Million Baht The Company Unit : Million Baht The Company The Company December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006 December 31, - 2007 December 31, - 2006 --

157

Provision for Liability Arising from Tax Assessment The subsidiary, Thai Tank Terminal Limited, applied for a refund of withholding tax totaling Baht 15.1 million for the years 1994-1996. Subsequently, the Revenue Department informed the subsidiary that it had not withheld tax on service fees paid to an overseas related parties which have Double Taxation Agreement with Thailand and assessed the tax and surcharges totaling Baht 15.2 million. The subsidiary disagrees with the tax assessment since the subsidiary received a refund of withholding tax for the previous year without any tax being assessed on the service fee. The subsidiary lodged an appeal against this tax assessment and received a decision on the appeal from the Revenue Department, reducing the amount of tax and surcharges to be assessed for the years 1994-1996 from Baht 15.2 million to Baht 13.3 million. The subsidiary lodged an appeal against this decision with the Central Tax Court, and on August 30, 2005, the Central Tax Court judged that the appeal decision was correct, and the subsidiary is required to deduct withholding tax from the above service fees. The subsidiary therefore appealed the decision to the Supreme Court on October 13, 2005. However, the subsidiary recorded the liability arising from tax assessment amounted to Baht 13.35 million in the statements of income. Advances from Fluid Loading / Unloading Facilities and Buffer Tank Farm Service Users The Subsidiary, Thai Tank Terminal Limited, entered into the memorandum of understanding relating to the principal of the service agreement for fluid loading/unloading facilities and buffer tank farm with local companies whereby the Company agreed to construct fluid loading/unloading facilities and buffer tank farm and the counterparties agreed to jointly invest in costs of certain facilities. The ownership of those assets and facilities belong to the Company. The Company is committed to provide services of fluid loading/unloading to the counterparties over the contract period. The Company recorded joint investment from the counterparties as “Advances from fluid loading/unloading facilities and buffer tank farm service users” and amortized it as income over the contract period. 24. Share Capital 24. Share Capital The Annual General Meeting of shareholders for the year 2006 held on April 26, 2006 had resolved as follow : Approved the increase in the Company's registered share capital for an additional amount of Baht 290,000,000 from the current registered share capital of Baht 11,311,410,000 to the newly registered share capital of Baht 11,601,410,000, by issuance of 29,000,000 new ordinary shares, par value at Baht 10 per share, for the warrants to purchase ordinary shares for the Company’s directors, management, consultant and employees. On May 18, 2006, the Company had registered the new share capital with Ministry of Commerce. The Extraordinary Meeting of shareholders No. 1/2006 held on September 28, 2006 has resolved to approve the increase of the Company's registered share capital for an additional amount of Baht 3,589,743,000 from

158

47 2007 ANNUAL REPORT

the current registered share capital of Baht 11,601,410,000 to the newly registered share capital of Baht 15,191,153,000, by issuance of 358,974,300 new ordinary shares, par value at Baht 10 per share, issuance of these increased share capital to the existing shareholders be percentage of shareholding and purchase of share capital in exceeding portion of each shareholders. On October 12, 2006, the Company had registered the new share capital with Ministry of Commerce. On December 2, 2006 , this new share had been paid for full amount. The premium on ordinary shares increases for amounted baht 24,410.25 million. On September 29, 2006, the Company had issued warrants to purchase ordinary shares of the Company for the Company’s directors, management, consultants and employees on amount 29 million units to 29 million shares (1 warrant has the right to purchase 1 ordinary share except for the adjustment the ratio). The exercise price is Bath 66.50 per share. Term of warrants in Employee Stock Ownership Plan or ESOP is 5 years from the date of the issuance of the warrants totaling shares amount 29 million. As at December 31, 2007, the warrants had been exercise totaling shares amount 6.46 million and the outstanding shares amount 22.54 million. The last exercise is on September 28, 2011. 25. Retained Earnings 25. Retained Earnings 25.1 Legal Reserve 25.1.1 The Company Under the Public Company Limited Act B.E. 2535, the Company is required to set aside as a legal reserve fund at least 5% of its annual net income until it reaches 10% of authorized share capital. This legal reserve can not use to pay dividend. On April 19, 2007 the Annual General Meeting of the Company’s shareholders approved the payment of a dividend of Baht 5.25 per share, totalling Baht 6,925.67 million, to the shareholders from the Company’s earnings for the year ended December 31, 2006. The dividend of Baht 2.50 per share, totalling Baht 2,827.85 million was paid as an interim dividend. The final payment of dividend of Baht 2.75 per share, would be made totalling Baht 4,097.82 million. The company had paid the final dividend on April 26, 2007. On August 24, 2007, the Board of Director Meeting was held and approved an interim payment of dividend to the shareholder at Baht 2 per share, totaling Baht 2,980.23 million and the Company had paid these interim dividend to the shareholders on September 19, 2007.

PTT CHEMICAL PUBLIC COMPANY LIMITED

159

25.1.2 Subsidiaries On March 20, 2007, the Annual General Meeting of Bangkok Polyethylene Plc,(a subsidiary of the Company) approved the payment of a dividend to the shareholders for the year ended December 31, 2006 at Baht 1.06 per share for 170 million shares, totalling Baht 180.20 million. The dividend was paid on April 18, 2007. On April 27, 2007, the Annual General Meeting of Thai Tank Terminal Limited,(a subsidiary of the Company) approved the payment of a dividend to the shareholders for the year ended December 31, 2006 at Baht 77.89 per share, totalling Baht 701 million, the payment of which was separated into 2 portions. The first portion was paid at Baht 38.95 per share, totalling Baht 350.55 million was paid on June 28, 2007 and the second portion was paid on December 13, 2007, at Baht 38.94 per share, totalling Baht 350.45 million. The Company had already eliminated this transaction. On April 30, 2007, the Annual General Meeting of TOC Glycol Company Limited,(a subsidiary of the Company) approved the payment of a dividend to the shareholders for the year ended December 31, 2006 at Baht 11.14 per share, totalling Baht 601.00 million. The dividend was paid on April 30, 2007. On October 25, 2007, the Annual General Meeting of TOC Glycol Company Limited,(a subsidiary of the Company) approved the payment of a interim payment of dividend to the shareholders at Baht 13.49 per share, totalling Baht 727.79 million. The dividend was paid on October 30, 2007. 25.2 Other Reserve 25.2.1 Reserve for loan repayment As at December 31, 2006, the Company has appropriated as reserve for loan repayment amounted to Baht 807.80 million which was carried from National Petrochemical Public Company Limited. 25.2.2 Reserve for expansion As at December 31, 2006, the Company has appropriated as reserve for expansion amounted to Baht 5,932.99 million which was carried from National Petrochemical Public Company Limited 26. Earnings per Share 26. Earnings per Share

Basic earnings per share is calculated by dividing net income attributable to ordinary shareholders by the weighted average number of ordinary shares which are held by third parties during the period. For the calculation of diluted earnings per share, the Company assumes that warrants of the Group given to directors, management and employees that can be exercised are converted to ordinary shares. The exercise of these warrants resulted in net income of the Group, recognized in the Companyâ&#x20AC;&#x2122;s financial statements, adjusted by decreases in shareholding proportions. The number of diluted shares was calculated by using a market price and exercise prices. This calculation is prepared to determine 160

2007 ANNUAL REPORT

the number of ordinary shares to be added to ordinary shares held by third parties for the calculation of diluted earnings per share. Basic earnings per share and diluted earnings per share for the year ended December 31, 2007 and 2006 are calculated as follows:

Consolidated Basic Earnings per Share Net income attributable to ordinary shareholders (Million Baht) Weighted average number of ordinary shares for calculation of earnings per share (Million Shares) Earnings per share (Baht/share)

Diluted Earnings per Share

2007

2006

2007

2006

19,167.22

18,282.19

19,167.22

18,282.19

1,491.62 12.85

1,160.65 15.75

1,491.65 12.85

1,160.67 15.75

The Company Basic Earnings per Share Net income attributable to ordinary shareholders (Million Baht) Weighted average number of ordinary shares for calculation of earnings per share (Million Shares) Earnings per share (Baht/share)

Diluted Earnings per Share

2007

2006

2007

2006

14,736.15

16,920.59

14,736.15

16,920.59

1,491.62 9.88

1,160.65 14.58

1,491.65 9.88

1,160.65 14.58

The adjustment of net income resulted from the issue of name registered and non-transferable warrants by the Company and the Group to their directors, management and employees. The Company issued warrants under the Employee Stock Ownership Plan (ESOP) as detailed in Note 24 27. Income 27. Income Tax Tax Corporate income tax has been calculated on the Companyâ&#x20AC;&#x2122;s income from non-promoted activities and promoted activities for which the income tax exemption period and corporate income tax on net income is reduced to fifty percent of the normal rate period has expired, after adding back certain provisions and expenses which are disallowable for tax computation purposes and deducting taxable loss brought forward and various provisions and expenses which are tax deductible, including allowances provided by the promotional privileges. PTT CHEMICAL PUBLIC COMPANY LIMITED

161

28. Employee and Employee Cost 28. Employee and Employee Cost Cost 28. Employee and Employee Number and expenses of employees 28. Employee and Employee Cost of the Company and subsidiaries for the year ended December 31, 2007 and 2006 and as follow : of employees of the Company and subsidiaries for the year ended December 31, 2007 Number expenses Number and expenses and 2006 as follow : of employees of the Company and subsidiaries for the year ended December 31, 2007 and 2006 as follow :

Consolidated 2007Consolidated Consolidated 2006 2007 2006 2,451 2,387 2007 2006 2,451 2,387 2,398.85 1,984.95 2,451 2,387

Number of employees at the end of period (persons) Number ofcosts employees the end of period (persons) Employee (Millionat Baht) Number of employees at the end of period (persons) 2,398.85 Employee costs (Million Baht) 2,398.85 Employee costs (Million Baht)

1,984.95 1,984.95

The Company The Company 2006 2007 The Company 2007 2006 1,413 1,359 2007 2006 1,413 1,359 1,477.45 1,771.35 1,413 1,359 1,477.45 1,771.35 1,477.45

1,771.35

29. Promotional Privileges 29. Promotional Privileges 29.29.Promotional Privileges The Promotional Company Privileges and some subsidiaries received promotional privileges under the Investment Act The Company received promotional privileges under the Act B.E.2520(1977) thesome production of chemical products from petroleum, utilities the operation The Companyforandand some subsidiaries subsidiaries received promotional privileges underproduction, the Investment Investment Act chemical petroleum, utilities the operation ofB.E.2520(1977) aB.E.2520(1977) liquid berth for and farm andofofstevedoring marinefrom transportation atproduction, Mab Ta the Phutoperation Industrial forthetank theproduction production chemicalproducts products from petroleum,services utilities production, of a liquid berth and tank farm and stevedoring marine transportation services at Mab Ta Phut Industrial of a Rayong liquid berth and tank Service, farm and Research stevedoringand marine transportationThe services at Mab Taprivileges Phut Industrial Estate, Laboratory Developement. promotional include Estate, Rayong Laboratory Service, Research and Developement. The promotional privileges include Estate, on Rayong Service, Developement. promotional include exemption importLaboratory duty approved fromResearch BOI andandcorporate income The tax for net incomeprivileges from promotional exemption on import duty approved from BOI and corporate income tax for net income from promotional exemption on import dutyfrom approved fromof BOI income for net income from promotional business for 8 years starting the date first and salescorporate are realized, andtaxreduction of corporate income tax on business for 8 years starting from the date of first sales are realized, and reduction of corporate income taxofon onthe business for 8 years starting from the date of first sales are realized, and reduction of corporate income tax net income to fifty percent of the normal rate for a period of 5 years starting from the date of expiry netnetincome to tofifty percent normal of expiry expiry ofof the the income fifty percentofofthethe normalrate rateforfora aperiod periodofof55years yearsstarting starting from from the the date date of corporate income tax exemption period. corporate income corporate incometaxtaxexemption exemptionperiod. period. The Company and subsidiary have comply with with allall conditions conditions and andregulation regulationforforthethepromotional promotional TheTheCompany andandsubsidiary have tototocomply Company subsidiary have comply with all conditions and regulation promotional operations asasstated in the Promotion Certificates. Certificates. operations operations asstated statedin inthethePromotion Promotion Certificates. The Company’s forforthe the year ended December31, 31,2007 2007and and2006 2006classified classifiedby TheThe Company’s andandsubsidiary’s subsidiary’s sales classified byby Company’sand subsidiary’ssales salesfor theyear yearended ended December December 31, 2007 promotional and non-promotional are follows promotional andand non-promotional businesses, promotional non-promotionalbusinesses, businesses,are areasasasfollows follows: :: The Company Company TheThe Company

Unit: Million : Million Baht Unit Baht Baht Promotional Promotionalbusinesses businesses Promotional businesses

Sales Sales Sales Local Local Local Export Export Export Total Total Total Service income Service income Service income Total Total Total 162

2007 2007 20072007

2006 2006 2006 2006

55,130.45 55,130.45 55,130.45

58,488.19 58,488.19

55,202.31 55,202.31 55,202.31

60,533.69 60,533.69

71.86 71.86 71.86

96.01 96.01 96.01

55,298.32 55,298.32 55,298.32

2,045.50 2,045.50

88.09 88.09 60,621.78 60,621.78

Non-promotional businesses Non-promotionalbusinesses businesses Non-promotional 2007 2007 2007 2007

2006 2006 2006 2006

7,619.83 7,619.83 7,619.83 ---

7,550.46 7,550.46 7,550.46 ---

7,619.83 7,619.83 7,619.83 194.10 194.10 194.10 7,813.93 7,813.93 7,813.93

7,550.46 7,550.46 7,550.46 180.28 180.28 180.28 7,730.74 7,730.74 7,730.74

2007 2007 2007 2007

Total Total

62,750.28 62,750.28 62,750.28 71.86 71.86 71.86

62,822.14 62,822.14 62,822.14 290.11 290.11 290.11 63,112.25 63,112.25 63,112.25

2006 2006 2006 2006

66,038.65 66,038.65 66,038.65 2,045.50 2,045.50 2,045.50

68,084.15 68,084.15 68,084.15 268.37 268.37

268.37

68,352.52 68,352.52 68,352.52

2007 ANNUAL REPORT

30. Business Segment Information 30. Business Segment Information The Company’s principal business is the production and distribution of olefins (ethylene and propylene). In addition, the Company also operates production support facilities such as jetty and buffer tank farm services for downstream petrochemical companies. The olefins production process consumes utilities, and the utilities production process also consumes by-products from the olefins production process. The jetty and buffer tank farm are essential facilities required to secure olefins production, particularly when there is insufficient supply of feedstock and olefins due to plant trip or shutdown for maintenance. The management of the Company presents all these parts are interdependent and must be considered as the same business segment. Furthermore, the Company’s secondary business is the generate and supply utilities comprise water, stream and electricity and production and sales polyethylene plastics as a separate business segment. Regarding the Company’s location, the Company has only one geographical segment, because the Company operates only in Thailand. However, the Company’s sales from both of domestic and export market. Thai Tank Terminal Limited conducts facilities and related services business including the storage and handling of liquid chemicals to downstream companies. NPTC Maintenance & Engineering Services Company Limited and NPC-TTCL Consortium conducts maintenance services business for factories in Thailand. NPC Safety and Environmental Service Company Limited conducts safety and environmental services business for factories in Thailand. TOC Glycol Company Limited conducts manufacturing and distributing EO and petrochemical products business Thai Ethoxylate Company Limited is conducts manufacturing and distributing Ethoxylate business. Thai Oleochemical Company Limited conducts manufacturing and distributing Methyl Ester and Fatty Alcohol business. Subsidiaries and Joint venture are under plant construction consists of : Thai Ethanolamines Company Limited conducts manufacturing and distributing Ethanol amines business. Thai Choline Chloride Company Limited conducts manufacturing and distributing Choline Chloride business. Information relating to business segments of the Company and subsidiary for the year ended December 31, 2007 and 2006 are as follows :

PTT CHEMICAL PUBLIC COMPANY LIMITED

163

164

2007 ANNUAL REPORT

Inventory â&#x20AC;&#x201C; net Property, plant and equipment â&#x20AC;&#x201C; net

Other income Gains (loss) on exchange rate Income before interest expense, financial charge and income tax Interest expense and financial charge Income tax Income after income tax Minority interest Net income for the year

Sales and service income Local Export Operating income (loss)

Consolidated

3,350.71 62,951.47

2,444.88 41,788.37

Production and sales of ethylene and propylene and related services 2007 2006 2006 2007 59,105.91 53,898.67 53,905.96 51,853.17 5,199.95 2,045.50 13,017.91 15,016.40

4,100.96

2,571.59

Generate and Supply utilities 2007 2006 2007 2006 2,928.75 3,019.67 2,928.75 3,019.67 715.77 680.20

3,656.01

3,055.38

Storage and handling of liquid chemicals 2007 2006 2007 2006 1,233.67 1,443.14 1,233.67 1,443.14 569.65 911.57

859.82 4,879.83

1,510.21 4,334.48

Manufacturing and sale of polyethylene 2007 2006 2007 2006 11,994.45 13,072.23 11,994.45 13,051.59 20.64 7,526.53 4,081.47

10.64 33.97

14.22 14.15

Factory maintenance service 2007 2006 2007 2006 189.07 333.66 189.07 333.66 (337.73) 258.70

4.01 99.54

3.05 27.47

Safety and environmental service 2007 2006 2007 2006 132.27 76.31 132.27 76.31 16.61 5.59

3,972.36 51,791.44

22,929.60 (1,137.02) (3,125.19) 18,667.39 (385.20) 18,282.19

23,008.54 (1,149.90) (2,287.99) 19,570.65 (403.43) 19,167.22 4,225.18 75,721.78

902.99 1,072.68

2006 2006 71,843.68 69,777.54 2,066.14 20,953.93

1,289.65 210.15

2007 2007 75,584.12 70,384.17 5,199.95 21,508.74

Total

Unit : Million Baht

PTT CHEMICAL PUBLIC COMPANY LIMITED

165

Property, plant and equipment-net

Inventory-net

Net income for the year

Income tax

Interest expenses and financial charge

charge and income tax

Income before interest expenses, financial

Gains (loss) on exchange rate

Other income

Operating income( loss)

Export

Local

Sales and service income

The Company

1,966.90 26,541.29

55,049.68 53,004.18 2,045.50 13,953.50

48,202.00 48,130.14 71.86 8,713.71

2,789.81 27,123.26

2006 2006

2007 2007

propylene andand related services propylene related services

Production Production and sales of ethylene ethyleneand and

4,100.96

2,928.75 2,928.75 715.77

2007 2007

Generate and supply utilities

2,571.59

3,019.67 3,019.67 680.20

2006 2006

388.58 2,562.32

11,981.50 11,981.50 4,349.45

2007 2007

662.55 2,683.76

10,283.17 10,283.17 3,859.04

2006 2006

Manufacturing and sales of polyethylene

17,955.11 (1,063.51) (2,155.45) 14,736.15 3,178.39 33,786.54

63,112.25 63,040.39 71.86 13,778.93 3,540.24 635.94

2007 2007

Total

21,016.15 (1,092.47) (3,003.09) 16,920.59 2,629.45 31,796.64

68,352.52 66,307.02 2,045.50 18,492.74 1,468.19 1,055.22

2006 2006

Unit : Million Baht

31. 31.31. Financial Financial FinancialInstruments Instruments Instruments 31.1 31.1Financial FinancialRisk RiskManagement ManagementPolicies Policies 31. Financial Instruments The TheCompany Companyand andsubsidiaries subsidiariesareareexposed exposedtotorisks risksfrom frominterest interestrates, rates,exchange exchangerates, rates,and andnonnon31.1 Financial Risk Management Policies performance performanceofofcontractual contractualobligations obligationsbybycounterparties. counterparties.The TheCompany Companyand andsubsidiaries subsidiariesuse usederivative derivative The asCompany and subsidiaries areappropriate, exposed to risks from interest rates, and noninstruments, instruments, as and and when when itit considers considers appropriate, toto manage manage such suchrates, risks. risks.exchange The The Company’s Company’s and and performance of contractual obligations by counterparties. The Company and subsidiaries use derivative subsidiaries’ subsidiaries’policy policydodonot nothold holdororissue issuederivative derivativeinstruments instrumentsforforspeculative speculativeorortrading tradingpurposes. purposes.

instruments, as and when it considers appropriate, to manage such risks. The Company’s and subsidiaries’ policy do not hold or issue derivative instruments for speculative or trading purposes. 31.2 31.2 Risk Riskfrom fromInterest Interest Rate Rate

Risks Risksfrom frominterest interest rate rate arearethethe risks risksthat thatfuture futuremovements movementsininmarket marketinterest interestrates rateswill willaffect affectthethe 31.2 Risk from Interest Rate results resultsofofRisks operations operations and andcash cash flows. TheCompany’s Company’s and andsubsidiaries’ subsidiaries’ exposure exposure tointerest interest rate raterisk risk from interest rateflows. are theThe risks that future movements in market interesttorates will affect the relate relateprimarily primarily theirdeposits deposits withflows. banks, banks,The long-term long-term loans loansand and and debentures. debentures. results tooftotheir operations and with cash Company’s subsidiaries’ exposure to interest rate risk relate primarily to their deposits with banks, long-term loans and debentures. AsAsatatDecember December31, 31,2007 2007and and2006 2006, ,thetheoutstanding outstandingbalance balanceofofThe TheCompany Companyand andaasubsidiary’s subsidiary’s Asswap atswap December 31,classified 2007 and by 2006 , the interest interestrate rate contracts, contracts, classified byterm term ofofoutstanding maturity maturityasasbalance follow follow:of: The Company and a subsidiary’s interest rate swap contracts, classified by term of maturity as follow :

Remaining Remainingperiod period Remaining period Up Uptoto11year year 11- -55years years

Principle Principle(Currency) (Currency)

2007 2007

Principle (Currency) 2006 2006

2007 2007

nterest Interestrate rateInterest swaps swapscontracts contracts from from rate swapsfrom contracts 20.00Million USD USD Fixed Fixedrate rateBath Bath currency 20.00 Million USD Fixedcurrency rate Bathtoto currency20.00 to Million 25.00 25.00Million Million USD USD 25.00 Million USD fixed fixedrate rateForeign Foreign currency currency fixed rate Foreign currency 40.00 40.00Million Million USD USD 40.00 Million USD of Thetotalling Company ofofThe TheCompany Company totalling totalling 20.00 Million USD 20.00 20.00Million Million USD USD 66contracts contracts6 contracts 10.00 Million USD 10.00 10.00Million Million USD USD 10.00 Million USD 10.00 10.00Million Million USD USD

2007 2007

2006 2006

------

2007 2007

3.79% 3.79% 3.79%

rate to fixed rate -144.13 144.13Million MillionBaht Baht Floating Floatingrate rateFloating totofixed fixed rate rate 240.00 Million Baht 360.00 Million Baht Baht currency of a subsidiary 240.00Million MillionBaht Baht 360.00 360.00Million MillionBaht Baht Baht Bahtcurrency currencyofofa asubsidiary subsidiary 240.00 700.00 Million Baht totalling 3 contracts 700.00 700.00Million MillionBaht Baht -totalling totalling33contracts contracts -

Up to 1 year 2006 2006

144.13 Million Baht

1 - 5 years 2007 2007 2006 2006 2007

2006 2006

2007

---

3.75% 3.75% 3.75% 4.70% 4.70% 4.70% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% --

----------3.52% 3.52% 3.52%

4.53% 4.53%

5.12% 5.12%

4.53%

5.12%

4.53% -

3.79% 3.79% 3.79%

2006 2006

-- -

3.75% 3.75% 3.75% 4.70% 4.70% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% 4.77% --

-- ---- -- 3.52% 3.52% 3.52%

4.53% 4.53%

5.12% 5.12%

4.53%

5.12%

4.53% -

31.3 Risks from Foreign Exchange Rates 31.3 31.3 Risks Risksfrom from Foreign ForeignExchange Exchange Rates Rates exposure to risks from foreign exchange rates relates primarily The Company’s and its subsidiaries’ to its accounts accounts payable, denominated in foreign currencies. The TheCompany’s Company’s and anditsitsreceivable, subsidiaries’ subsidiaries’ exposure exposure totoloans risks riskswhich from fromare foreign foreign exchange exchange rates ratesrelates relatesprimarily primarily In 2007, in order to hedge against the risk of possible exchange losses from future payment of totoitsitsaccounts accountsreceivable, receivable,accounts accountspayable, payable,loans loanswhich whicharearedenominated denominatedininforeign foreigncurrencies. currencies. currency, a subsidiary has entered into many forward to obtainofUSD InIn2007, 2007,inliability inorder orderintotoforeign hedge hedgeagainst againstthethe risk riskofofpossible possible exchange exchange losses losses from fromcontracts future futurepayment payment of million for contracted valuehas ofhasBaht 7,230.22 million. liability liabilityinin202.47 foreign foreign currency, currency, aasubsidiary subsidiary entered entered into intomany manyforward forwardcontracts contractstotoobtain obtainUSD USD As at December 31, 2007, theofCompany’s foreignmillion. currency-denominated assets/liabilities, which were 202.47 202.47million million forforcontracted contracted value value ofBaht Baht7,230.22 7,230.22 million. unhedged, are as follows :

AsAsatatDecember December31, 31,2007, 2007,thetheCompany’s Company’sforeign foreigncurrency-denominated currency-denominatedassets/liabilities, assets/liabilities,which whichwere were unhedged, unhedged,areareasasfollows follows: : 166

2007 ANNUAL REPORT

Currency USD EUR YEN

Assets 1.76 Million 0.26 Million 22.58 Million

Liabilities 304.83 Million 0.66 Million 21.25 Million

31.4 Credit risks and liquidity risks Credit risks refer to the risks that counterparties will default in contractual obligations resulting in a financial loss to the Company and subsidiaries. Liquidity risks arise from the possibility that customers may not be able to settle obligations to the Company and subsidiaries within the normal terms of trade. The Company simultaneously manages credit and liquidity risks. For local sale, due to the petrochemical industry is an investment intensive business and the Company’s products are major feedstock for its customers and have to be distributed through connected pipelines, the Company’s products are therefore sold to local customers with long-term sales agreements. Moreover, most of the Company’s customers are also the Company’s shareholders, the Company’s billings are therefore regularly paid. For the customers without long-term agreements, the Company always assesses the risks and chooses only good credit customers. In addition, the risks are always limited within an appropriate amount and in some cases required guarantee. As regards its exports, the Company makes annual sales agreement for the major part of its export volume and also requests its customers to provide stand by letter of credit as a guarantee. The remaining part of its exports is sold only to good credit customers with separate special terms of payment for each transaction. With respect to off-balance sheet derivative financial instruments, the Company and subsidiaries have policy to make financial instruments with creditworthy counterparties. Therefore, the Company does not expect any material losses to arise from the counterparties’ failure to perform their obligations under the financial instruments. 31.5 Fair value Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction. Fair value are obtained from quoted market prices, discounted cash flow models or net asset value as appropriate. The methods and assumptions are used to estimate the fair value of financial instruments as follows : Cash and cash equivalents, current investments, accounts and notes receivable - the carrying values does immaterially differ from their aggregate fair values due to the relatively short-term maturity of these financial instruments. Investment in share capital - the fair values of publicly traded instruments are estimated based on the last bidding price of the Stock Exchange of Thailand, all other instruments for which there are no quoted market prices, a reasonable estimate of fair value has been calculated based on the underlying net asset base for such investment, which approximates their carrying values.

PTT CHEMICAL PUBLIC COMPANY LIMITED

167

Accounts payable - the carrying amounts of these financial liabilities does immaterially differ from their aggregate fair values due to the relatively short-term maturity of these financial instruments. Long-term loans, bills of exchange and debentures carry interest at a floating rate, which is considered to be market rate - the carrying value approximates their fair value. Debentures with fixed interest rates the fair value is estimated based on a discounted cash flow analysis, using the average interest rates currently being offered for loans with similar credit quality as at December 31, 2007 and 2006 are as follow : The Company

Book value Baht currency (Million Baht) Foreign currency (Million USD)

2007 6,926.85 298.80

2006 2,214.29 298.65

Fair value 2007 6,929.12 290.10

2006 2,179.37 287.94

32. Significant Long-term Agreements 32. Significant Long-term Agreements

The Company 32.1 Olefins OlefinsSales SalesAgreement Agreement On December 16, 1992, the Company entered into the Olefins Sales Agreement with five companies, for the period of 15 years commencing from June 1, 1995. Under the agreement it is agreed that purchases by these companies will not be lower than the volume specified in the agreement with product prices based on prices prevailing in the world market. On April 3, 1998, the Company entered into Purchase and Sale of Propylene Agreement with a company, for the period of 9 years commencing from July 1, 1999, with product prices based on prices prevailing in the world market. On February 6, 2002, the Company entered into Purchase and Sale of Expansion Ethylene Agreement with PTT Public Co., Ltd. for the period of 7 years commencing from commercial operation date of expansion unit of the Company. Product prices are based on prices prevailing in the world market. On July 1, 2003, the Company entered into Ethylene Sales Agreement with Thai Polyethylene Company Limited and concurrently abrogated its obligations under the former Olefins Sales Agreement and Expansion Olefins Sales Agreement. The selling price structure under this new agreement is characterized by profit sharing from polyethylene product (HDPE). This agreement is effective from July 1, 2003, and expires in 2016. On November 1, 2003, the Company entered into Ethylene Sales Agreement with Thai Plastic and Chemicals Public Company Limited and concurrently abrogated its obligations under the former Olefins Sales Agreement and Expansion Olefins Sales Agreement. A new selling price structure for ethylene is formulated under this agreement with reference to the US market (Net US Gulf Coast) and 168

2007 ANNUAL REPORT

the Southeast Asian market (CFR SE ASIA) prices. This agreement is effective from November 1, 2003, and expires in 2016. On February 25, 2004, the Company cancelled propylene sales agreement with HMC Polymers Company Limited, effective from January 1, 2004, and entered into a new propylene sales agreement with HMC Polymers Company Limited, whereby the propylene pricing structure was changed from the Mab Ta Phut price to profit sharing based on the average price of polypropylene (PP Film). The above agreement is effective from 1 January 1, 2004, and expires as at December 31, 2016. On May 18, 2004, the Company cancelled a propylene sales agreement with Thai Polyethylene Company Limited, effective from June 1, 2004, and entered into a new propylene sales agreement with Thai Polypropylene Company Limited, whereby the propylene pricing structure was changed from the Mab Ta Phut price to profit sharing based on the average price of polypropylene (PP Film). The above agreement is effective from June 1, 2004, and expires as at December 31, 2016. On February 28, 2005, the Company entered into the Ethylene Sales Agreement with Vinythai Public Company Limited, for the period of 15 years. The Ethylene selling prices are based on market prices.The Company will be deliver the product and commencing agreement within this year. On July 7, 2006, the Company entered into the Ethylene Sales Agreement with TOC Glycol Company Limited, for the period of 15 years. The Ethylene selling prices are based on ethane prices that PTT Public Company Limited charges to the Company. On May 25, 2007, the Company entered into the Propylene Sales Agreement with PTT Phenol Company Limited, for the period of 15 years. The selling prices are based on polypropylene and propylene market prices. The Company will be deliver the product in the second quarter. On July 26, 2007, the Company entered into propylene sales agreement with IRPC Public Company Limited, for the period of 15 years. The selling prices are based on the propylene market price. The above agreement is effective from July 1, 2007, and expires as at June 30, 2008. 32.2 Feedstockand andFuel FuelGas GasSales SalesAgreement Agreement 32.2Feedstock On October 18, 1991, the Company entered into NGL Supply Agreement and LPG Supply Agreement with PTT Public Co., Ltd. (Former name : Petroleum Authority of Thailand) for the period of 15 years commencing from June 1, 1995, Commercial Operation Date of the Company, is renewable for another period of 5 years with the agreement of both parties. On October 17, 1997, the Company entered into Purchase and Sale of Light Naphtha and Raffinate Agreement with The Aromatics (Thailand) Public Co., Ltd., for the period of 15 years. On June 1, 1999, the Company entered into an agreement regarding the transferring of rights and obligations of the agreement to PTT Public Co., Ltd., and purchased Light Naphtha and Raffinate from PTT Public Co., Ltd. Instead of from The Aromatics (Thailand) Public Co., Ltd. On September 9, 1999, the Company entered into the Feedstock Sales Agreement and the Natural Gas Sales Agreement with PTT Public Company Limited (PTT). Under the Feedstock Sales Agreement, the feedstock pricing structure is changed to link to the olefins prices at which the Company sells to its

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customers, in the manner stipulated in the agreement. This agreement is effective from January 1, 1999, is to continue in force for 12 years, and is renewable for another period of 5 years with the agreement of both parties. The Natural Gas Sales Agreement is the standard agreement under which PTT sells natural gas to small power producers (SPP). This agreement was effective from January 1, 1999, is to continue in force for 20 years, and is renewable for another period of 4 years with the agreement of both parties. On September 17, 2001, the Company entered into Ethane Supply Agreement with PTT Public Company Limited for the period of 15 years commencing from August 1, 2005, (Startup date), is renewable for another period of 5 years with the agreement of both parties. On July 31, 2003, the Company amended the part of the Feedstock Sales Agreement with PTT Public Company Limited dealing with ethane, under the amendment the pricing structure is changed to link it to the Companyâ&#x20AC;&#x2122;s selling price for polyethylene (HDPE). This agreement is effective from July 1, 2003, and expires in 2016. On February 20, 2004, the Company entered into a Feedstock Sales Agreement with PTT Public Company Limited under which the propane/LPG pricing structure was changed from profit sharing based on the price of propylene to profit sharing based on the average price of polypropylene (PP Film). The amendment is effective from January 1, 2004, and extends the original expiry date of the agreement from December 31, 2010, to December 31, 2016. On September 23, 2005, a subsidiary entered into Purchase and Sale agreement of the Liquefied Natural Gas Agreement with PTT Public Co., Ltd. For the period of 15 years. The agreement period commenced on the date of the first receipt and distribution of the said gas and could be extended in accordance with the condition of agreement. 32.3 Utilities Sales Agreement On July 25, 1987, the Company entered into the Utilities Sales Agreement with three downstream petrochemical plants whereby the Company agreed to sell utilities, consisting of electricity, steam, treated water, etc. to such downstream plants. The agreement was effective from the date when the Company commenced sales under the agreement, which was October 1, 1991, will continue in force for the period of 15 years, and is renewable for another period of 15 years. On November 27, 1995, the Company entered into Power Supply Agreement with a company to purchase electricity for the period of 15 years. The Company entered into the Small Power Plant(SPP) Electricity Sales Agreement with Electricity Generating Authority of Thailand (EGAT) for the period of 21 years commencing for firm contract from April 1, 1997. The Company entered into Power Supply Agreement with HMT Polystylene company Limited(HMT) to supply 1.8 MWh. electricity for the period of 15 years commencing from September 1999. On June 8, 1999, The Company entered into Memorandum of Understanding of Power Supply with Bangkok Polyethylene Public company Limited(BPE) to supply 12 MWH electricity for the period of 15 years commencing from October 31, 2000. 170

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On January 1,2007, The Company had extended Utilities sales Agreement with HMC Polymer company Limited(HMC) to supply utilities for the period of 10 years. On January 1,2007, The Company had extended Utilities sales Agreement with Thai Polyethylene company Limited(TPE) to supply utilities for the period of 10 years. The Company entered into the additional Power Supply Agreement with Tokuyama Siam Silica company Limited(TSSC) plant 2 to supply 1.8 MWh. electricity for the period of 15 years commencing from October 2006. The Company entered into Power Supply Agreement with Thai Tank Terminal company Limited(TTT) to supply 2.5 MWh. electricity for the period of 15 years commencing from January 2002. The Company entered into Steam Supply Agreement with Tokuyama Siam Silica company Limited(TSSC) to supply average 4 Ton per Hour steam for the period of 15 years commencing from October 2002. The Company entered into Steam Supply Agreement with Peroxithai company Limited(POT) to supply average 4 Ton per Hour steam for the period of 5 years commencing from January 2004. On January 1,2007, The Company had extended Utilities sales Agreement with Thai Plastic and Chemical Public company Limited(TPC) to supply utilities for the period of 10 years. The Company entered into Power Supply Agreement with Thai Plastic and Chemical Public company Limited(TPC) PVC9 to supply 3 MWh. electricity for the period of 5 years and renewable for 5 years commencing from January 2007. The Company entered into Power Supply Agreement with TPC Paste Resin Company Limited (TPC-PR) to supply 4 MWh. electricity for the period of 15 years commencing from March 2003. The Company entered into Memorandum of Understanding of Power Supply after expired Agreement with Bangkok Polyethylene Public company Limited(BIG) to supply 5 MWH electricity for the period from October 1, 2007 to September 30, 2008. 32.4 Nitrogen Supply Agreement On May 2, 2003, the Company entered into the Nitrogen Supply Agreement with Bangkok Industrial Gases Company Limited for the period of 10 years commencing from October 16, 2004, and was renewable with the provision of 2 yearsâ&#x20AC;&#x2122; notice prior to the expiry date. On November 26, 1992, the subsidiary entered into the Nitrogen Purchase Agreement with Bangkok Industrial Gases Company Limited for the period of 15 years commencing from the first day of the month following the date equipment was installed and ready for operations. This agreement is automatically renewable and can be terminated by either party provided not less than 6 monthsâ&#x20AC;&#x2122; prior written notice to the counterparty. On Sep 5, 2006, the Company entered into the Nitrogen Supply Agreement with Thai Industrial Gases Public Company Limited for the period of 8 years and can be terminated by either party provided not less than 12 months; prior written notice to the counterparty PTT CHEMICAL PUBLIC COMPANY LIMITED

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32.5 Hydrogen Supply Agreement On October 1, 2005, the Company entered into a new Raw Hydrogen Supply Agreement (Raw H2) with Bangkok Synthetics Company Limited for the period of 4 years commencing from October 1, 2005, to September 30, 2009. On October 1, 2005, the Company entered into a new Raw Hydrogen Supply Agreement (Raw H2) with Bangkok Industrial Gas Company Limited for the period of 3 years commencing from July 1, 2005 to June 30, 2008. On October 1, 2005, the Company entered into a new Purified Hydrogen Supply Agreement (Pure H2) with Bangkok Industrial Gas Company Limited for the period of 3 years commencing from November 23, 2005, and can be extended by further terms of 1 year with the mutual agreement of the parties 32.6 Polyethylene Sale Agreement On August 31, 2005, the Company and PTT Polymer Marketing Company Limited signed a memorandum of understanding regarding polyethylene sales for the period of 6 months ending on February 28, 2006, and renewable for another period of 1 year. On December 1, 2005, this memorandum was amended because certain content was unclear and could not be implemented in practice. Although there is an option to extend the memorandum of understanding, because of changes in the pricing structure both parties agree that a new memorandum should instead be executed, to ensure fairness to both parties and avoid distorting their incomes in an abnormal market situation. On September 29, 2006, the Company and PTT Polymer Marketing Company Limited entered into the polyethylene sales agreement for the period of 15 years commencing from January 1, 2007. Under this agreement PTT Polymer Marketing Company Limited has the right to sales the company’s HDPE products. This agreement will has the pricing structure that reflect to the market situation and fairness to both parties. 32.7 Shareholder’s Commercial Support Agreement The Company, issuer of bonds in accordance with Note 20, entered into Shareholder’s Commercial Support Arrangement with PTT Public Co., Ltd. (PTT) and bondholders’ representative, which PTT has provided a commercial trade credit line amounting to USD 100 million to the Company (As at December 31, 2007, this commercial credit line has not been used). Subsidiaries 32.8 Intellectual Property License Agreement On August 3, 1992, the subsidiary entered into an agreement with Vopak Holding International B.V. to obtain licenses for certain intellectual property rights to assist in the construction and operation of the liquid bulk terminal and tank farm. Under the terms of the agreement, the subsidiary is committed to pay Vopak Holding International B.V. a monthly fee at 0.5% of its actual gross revenues. This

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agreement remains in effect as of June 1, 1992 and is to continue in effect for the entire term of the concession agreement with the Industrial Estate Authority of Thailand (IEAT). 32.9 Offshore 32.9 OffshoreServices ServicesAgreement Agreement On August 3, 1992, the subsidiary entered into an agreement with Vopak Holding International B.V. for the latter to make available to the subsidiary company advice, assistance, training and other services relating or applicable to the construction, management and operation of the liquid bulk terminal and tank farm. The subsidiary is committed to pay a monthly fixed fee as specified in the agreement and a monthly variable fee at 1% of its revenues. This agreement remains in effect as of June 1, 1992, and is to continue in effect for the entire term of the concession agreement with the Industrial Estate Authority of Thailand (IEAT). 32.10 32.10 Agreement Agreementforforpurchase purchaseofofmaterial material On August 20, 2004, the subsidiary entered into Sales and Purchase Oxygen Agreement with Map Ta Phut Industrial Gases Company Limited for the period of 15 years commencing from April 1, 2006 and could be extended by either party provided not less than twelve months’ prior written notice to the other party. On September 14, 2004, the subsidiary entered into Sales and Purchase Nitrogen Agreement with Map Ta Phut Industrial Gases Company Limited for the period of 15 years commencing from April 1, 2006 and could be extended by either party provided not less than twelve months’ prior written notice to the other party. On September 23, 2005, the subsidiary entered into Natural Gas Sales Agreement with PTT Public Company Limited for the period of 15 years commencing on the date of the first receipt and distribution of the said gas and could be extended by either party provided not less than 6 months’ prior written notice to the other party. On April 5, 2007, the subsidiary entered into Sales and Purchase Stream Agreement with PTT Utility Company Limited for the period of 15 years commencing from January 1, 2007. On April 5, 2007, the subsidiary entered into Sales and Purchase Electricity Agreement with PTT Utility Company Limited for the period of 15 years commencing from January 1, 2007. On April 5, 2007, the subsidiary entered into Sales and Purchase Demineral Water Agreement with PTT Utility Company Limited for the period of 15 years commencing from January 1, 2007. On November 8, 2005, the subsidiary entered into Sales and Purchase of Crude Palm Oil Agreement and Sales and Purchase of Crude Palm Kernel Oil Agreement with a company for the period of 20 years commencing from August 2011. Under the agreement, the subsidiary is agreed that purchases from that company will not be lower than the volume specified in the agreement with product price based prevailing in the world market. On July 16, 2007, the subsidiary entered into pre supply Crude Palm Oil

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Agreement, separately that the contractor must procure Crude Palm Oil from the other source for supply to the subsidiary before the effective of the said agreement . 33. Reclassification 33. Reclassification

The Company has reclassification in consolidated financial statements for the year ended December 31, 2006 to conform with the classification used in the consolidated financial statements for the three-month and nine-month period ended September 30, 2007 which didn’t affect net income and shareholders’ equity. 34. Commitments and Contingent LiabilitiesLiabilities 34. Commitments and Contingent As at Dectember 31, 2007 the Company’s and subsidiaries’ commitments and contingent liabilities are as follow : 34.1 The Company and subsidiaries have obligation from Letter of Guarantee issued by the local banks amounting to approximately Baht 790.86 million (the Company : Baht 680.27 million). 34.2 The Company and subsidiaries have obligations concerning expand capacity of plant project, supply and the construction of liquid bulk terminal and tank farm, computer software installation agreement and gas turbine generators maintenance agreement totalling approximately Baht 2,057.73 million (the Company : Baht 245.27 million). 34.3 The Company has obligations concerning an agreement to purchase a license and technology for low density polyethylene and ethylene vinyl acetate production process amounting to Baht 203.31 million. 34.4 The Company and subsidiaries have entered into numerous agreements to lease land from the Industrial Estate Authority of Thailand at Mab Ta Phut Industrial Estate. The agreements commence and end on various dates, the Company and subsidiaries are committed to pay annual rental fees and fixed fees totalling Baht 33.66 million and Baht 28.73 million, respectively for the year 2007, as well as annual variable fee to be paid by the subsidiaries at agreed rate based on the metric throughput of liquid chemicals in the terminal facility. The annual rental rates and the periods of the agreements can be adjusted. 34.5 The Company and subsidiaries have obligations concerning office rental and service agreements totalling Baht 30.50 million (the Company: Baht 30.35 million). 34.6 The Company has obligations concerning uncalled portion of investment in the ordinary shares of subsidiaries and associated company Baht 730.00 million. and Bath 659.34 million, respectively. 35. Subsequent Events Events 35. Subsequent

The Company’s board of directors approve the financial statements for public issuance on February 22, 2008. --------------------------------------------174

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ABBREVIATION & GLOSSARY

CHEMICAL PRODUCTS DEG EG EO EVA FA HDPE LDPE LLDPE LN LPG ME MEG MTBE NGL PC PE PET PP PS PTA PVC PX PYGAS TEG VCM

Di-ethylene Glycol Ethylene Glycol Ethylene Oxide Ethylene Vinyl Acetate Fatty Alcohols High Density Polyethylene Low Density Polyethylene Linear Low Density Polyethylene Light Naphtha Liquefied Petroleum Gas Methyl Ester Mono Ethylene Glycol Methyl Tertiary Butyl Ether Natural Gasoline Polycarbonate Polyethylene Poly Ethylene Terephthalate Polypropylene Polystyrene Purified Terephthalic Acid Poly Vinyl Chloride Paraxylene Pyrolysis Gasoline Tri-ethylene Glycol Vinyl Chloride Monomer

OTHERS GTG-C, GTG-D SWRO

PTT CHEMICAL PUBLIC COMPANY LIMITED

GAS TURBINE GENERATOR PROJECT C, D SEA WATER REVERSE OSMOSIS

175

ASSOCIATES/ RELATED COMPANIES BPE NPC S&E NPTC PPCL PTTICT PTTPE PTTPM PTTUT TCC TEA TEX TFA TOCGC TOL TTT VNT

176

Bangkok Polyethylene PLC NPC Safety And Environmental Service Co., Ltd. NPTC Maintenance & Engineering Services Co., Ltd. PTT Phenol Co., Ltd. PTT ICT Solutions Co., Ltd. PTT Polyethylene Co., Ltd. PTT Polymer Marketing Co., Ltd. PTT Utility Co., Ltd. Thai Choline Chloride Co., Ltd. Thai Ethanolamines Co., Ltd. Thai Ethoxylate Co., Ltd. Thai Fatty Alcohol Co., Ltd. TOC Glycol Co., Ltd. Thai Oleochemicals Co., Ltd. Thai Tank Terminal Ltd. Vinythai PLC

2007 ANNUAL REPORT