Contents Financial Highlights .................................................................................................................
10
PTT Information .......................................................................................................................
13
Message from the Board of Directors ....................................................................................
14
Report of the Audit Committee ...............................................................................................
16
World Petroleum Overview .....................................................................................................
18
Performance Review ...............................................................................................................
22
PTT and Its Affiliates ...............................................................................................................
44
Revenue Structure of PTT and Subsidiaries by Product Line .............................................
45
Connected Transactions .........................................................................................................
46
Management Discussion and Analysis of Financial Status and Performance ...................
50
Risk Factors .............................................................................................................................
56
Organization Chart ..................................................................................................................
61
PTT Board of Directors ...........................................................................................................
62
PTT Executives ........................................................................................................................
70
Shareholding and Management Structure .............................................................................
77
Corporate Governance ............................................................................................................
94
Recognitions ............................................................................................................................ 108 Quality, Safety, Health and Environment Performance ........................................................ 114 Social and Environmental Responsibility for Sustainability ................................................. 120 Report of Board of Directors’ Responsibilities ...................................................................... 128 Auditor’s Report ....................................................................................................................... 129 Financial Statements ............................................................................................................... 130 Audit Fees of the Auditors ...................................................................................................... 200 Glossary of the Technical Terms ............................................................................................ 201
FINANCIAL HIGHLIGHTS
2004
2005
2006
644,694
926,269
1,213,985
79,296
114,045
142,675
62,666
85,521
95,261
Assets
487,226
649,807
751,453
Liabilities
302,311
371,374
397,131
Shareholders’ Equity and Minority Interests
184,915
278,433
354,322
Shareholders’ Equity
164,374
230,817
287,832
2,797.25
2,797.25
2,804.93
Statements of Income
(Million Baht)
Sales Revenues Earnings before Interest Expenses, Finance Costs, Income Taxes, Depreciation and Amortization Including Other Expenses and Income not Relevant to Operations (EBITDA) Net Income Balance Sheets
(Million Baht)
Shares Issued and Fully Paid-up Share Capital
(Million Shares)
Book Value Per Share1/
(Baht)
58.76
82.52
102.81
Earnings Per Share1/
(Baht)
22.40
30.57
34.02
Dividends Per Share
(Baht)
6.75
9.25
Dividend Payout Ratio on Net Income
(%)
30.13
30.26
30.86
Share Price as of Ending Financial Period
(Baht)
173.00
226.00
210.00
10.502/
Financial Ratios Net Income on Total Revenues
(%)
9.21
8.93
7.57
Return on Equity
(%)
39.93
36.91
30.11
Return on Total Assets
(%)
15.44
15.04
13.60
Debt to Equity
(Times)
1.63
1.33
1.12
Net Debt to Equity
(Times)
0.60
0.54
0.38
Net Debt to EBITDA
(Times)
1.40
1.31
0.94
Interest Coverage
(Times)
10.09
14.10
13.75
Notes: 1/ Calculated from the weighted average number of ordinary shares of 2,797.25 million (as of December 31, 2004), 2,797.25 million (as of December 31, 2005), and 2,799.75 million (as of December 31, 2006). 2/ PTT Board of Directors approved the rate of dividend paid to the shareholders on February 23, 2007 and the rate will be brought to the 2007 AGM for resolution on April 30, 2007.
010
PTT Public Company Limited
Sales Revenues
1,213,985
Unit : Million Baht
Growth 31%
926,269 Growth 44%
644,694
Petrochemicals and Refining Business Group
4%
10%
13% 30%
22%
22%
65%
66%
68%
Exploration & Production and Gas Business Group
2004
2005
Oil Business Group
2006
Net Income Unit : Million Baht
95,261 85,521
Growth 11%
Growth 36%
62,666
Gain from the debt restructuring in RRC
6%
5%
12%
PTTCH
41%
43%
Rayong Refinery Co., Ltd. (RRC)
39% 25%
16%
2004
Gain from selling shares in RRC
7%
9%
PTT
38%
22% 18%
2005
Associates
19%
PTTEP
2006 PTT Public Company Limited
011
Balance Sheets Unit : Million Baht
751,453 Growth 16%
649,807 Growth 33%
487,226
222,014
195,624
Other Assets
101,415
122,415
190,187
Other Liabilities
160,891
219,951
Long-term Loans
337,132
354,322
Shareholders’
219,610
201,593 305,378
Fixed Assets
177,180
151,764
100,718 Current Assets
253,430
184,915
2004
278,433
Equity
2005
2006
Financial Ratio
Net Debt to Equity (Times)
Return on Equity (%)
39.9
0.6 36.9
0.5 30.1
0.4 Net Debt to EBITDA (Times)
Return on Total Assets (%)
1.4
15.4 15.0
1.3
0.9
13.6 Interest Coverage (Times)
Debt to Equity (Times)
14.1
1.6
13.8
1.3
2004 012
2005
PTT Public Company Limited
1.1
10.1
2006
2004
2005
2006
PTT INFORMATION Name : PTT Public Company Limited Initial : PTT Registered Number : 0107544000108 Type of Business : Engage in integrated gas and petroleum business, and other support activities, including a dominant position in oil and investment in related business.
Number of Employee : As of December 31, 2006 employees of PTT, its Subsidiaries and Joint-Ventures numbered : 8,533 ●
PTT Plc. (PTT)
3,184
●
PTT Exploration and Production Plc. (PTTEP)
1,103
●
PTT (Cambodia) Co., Ltd. (PTTCL)
59
●
Subic Bay Energy Co., Ltd. (SBECL)
●
Retail Business Alliance Co., Ltd. (RBA)
●
PTT International Trading Pte., Ltd. (PTTT)
●
PTT Natural Gas Distribution Co., Ltd. (PTTNGD)
69
●
PTT LNG Co., Ltd. (PTTLNG)
20
●
PTT Phenol Co., Ltd. (PPCL)
40
●
PTT Chemical Plc. (PTTCH)
●
PTT Polymer Marketing Co., Ltd. (PTTPM)
●
PTT Utility Co., Ltd. (PTTUT)
50
●
Energy Complex Co., Ltd. (EnCo)
16
●
PTT ICT Solutions Co., Ltd. (PTTICT)
●
PTT Polymer Logistics Co., Ltd. (PTTPL)
●
Trans Thai-Malaysia (Thailand) Ltd. (TTM (T))
●
Trans Thai-Malaysia (Malaysia) Ltd. (TTM (M))
●
District Cooling System and Power Plant Co., Ltd. (DCAP)
●
PTT Asahi Chemical Co., Ltd. (PTTAC)
●
PTT HMC Polymer Co., Ltd. (HMC)
90 727 6
2,387 -
395 3 158 6 11 229
Location : 555 Vibhavadi Rangsit Road, Chatuchak, Bangkok 10900, Thailand Telephone : 0-2537-2000 Telefax : 0-2537-3498-9 Website : http://www.pttplc.com Registered Capital : Baht 28,572,457,250, including 2,857,245,725 million common shares, Baht 10 per share (as of December 31, 2006)
Paid-up Capital : Baht 28,049,256,250, including 2,804,925,625 common shares, Baht 10 per share (as of December 31, 2006)
References Share Registra : Thailand Securities Depository Company Limited th
th
th
Auditor : Office of the Auditor General
4 , 6 and 7 Floor, SET Building, Bangkok 10500, Thailand
Rama VI Road, Phayathai, Bangkok 10400, Thailand
Telephone : 0-2359-1200-1
Telephone : 0-2618-5803
Telefax : 0-2359-1259
Telefax : 0-2618-5807 PTT Public Company Limited
013
“ √M® “E°S§S≥A–G° E√ √F¡R ° “O√M T H E B O A R D O F D I R E C T O R S
The year 2006 was the year of an auspicious occasion of the 60th Anniversary Celebrations of His Majesty’s Accession to the Throne, during which all Thais played their homage to our King’s benevolence and the myriad tasks he has done for the well-being of his subjects. This is evident in the Thais’ collective commitment to doing good deeds in dedication to His Majesty. To this end, it is the commitment of PTT Public Company Limited (PTT) to “Develop Sustainably” by conducting the business with equitable treatment of the stakeholders, as well as the stewardship of communities and the environment. Our core project in honor of His Majesty, “Vetiver Grass Cultivation Program to honor HM th the King on the auspicious occasion of the 60 Anniversary Celebrations of His Majesty’s Accession to the Throne,”
followed his initiative to support Thai people to grow vetiver to preserve soil and water. PTT also participated in national activities to honor our King, including a grand exhibition to commemorate this auspicious occasion and a grand display of fireworks coupled with a light-and-sound show entitled “Ray of Hope and Loyalty.” Toward year-end, PTT took part as a major sponsor of the Royal Flora Exhibition Ratchaphruek 2006 at the Royal Agricultural Research Center in Mueang District, Chiang Mai Province. PTT and its subsidiaries experienced remarkable success in conducting its business this past year under a management approach focused on creating synergy in the PTT Group, designed to sharpen its international competitive edge. As a group, we derived Baht 1,213,985 million in sales revenue, a 31.1% rise from the previous year; Baht 142,675 million in EBITDA, a 25.2% rise; Baht 95,261 million in net income, an 11.4% rise; and Baht 10.50 per share in dividend. The Exploration & Production and Gas Business Group sold 3,084 MMcf/d, a 2.9% rise from 2005, while our gas separation plant product sales amounted to 3.67 million tons, a 6% rise from the same period. PTT’s promotion of Natural Gas for Vehicles (NGV) continued, as it is clean, environmentally benign, and less costly than gasoline. For the year, the Oil Business Group sold 14,310 million liters or roughly 246,600 bbl/d, a 3.3% drop from 2005, as world oil prices continued their surge and the domestic diesel price was floated, prompting people to save on diesel. Yet, PTT continued occupying its top market share for the 14
014
PTT Public Company Limited
th
consecutive year with an overall 34.9%
market share. This is a proof of domestic oil business leadership committed to developing quality products and alternative energy, also evident in PTT’s pioneering role in the sales of the high-quality gasohol product known as “PTT Gasohol 95 Plus” at its service stations nationwide. Another good example is the development of the Company’s lubricating oil product, “Performa Super Synthetic,” which is a new, 100% synthetic gasoline lubricating oil that can save 5-8% on gasoline consumption. For the year, PTT’s international trading of crude oil, condensate, refined products, and petrochemicals amounted to 35,270 million liters or roughly 607,798 bbl/d, a 10.7% rise from 2005. The Petrochemicals and Refining Business Group underwent restructuring for sharper business operation, whereby PTT Chemical Public Company Limited has been the leader in the olefins business and expanded its investment and joint investment into midstream and downstream industries. Examples included the foundation of PTT Asahi Chemical Company Limited for acrylonitrile and methyl methacrylate production, and the purchase of Polypropylene producer HMC Polymers Company Limited shares. For greater efficiency of the refining group, PTT successfully brought Thai Petrochemical Industries Public Company Limited (TPI) out of the Central Bankruptcy Court’s business rehabilitation plan. In addition, PTT bought capital increase shares of Bangchak Petroleum Public Company Limited to undertake product quality improvement, and listed Rayong Refinery Public Company Limited on the Stock Exchange of Thailand. Thanks to PTT’s potential, PTT has played a key role in generating confidence for investors, domestic and international, in the Thai economy. In year 2006, PTT received 29 awards and prestigious ranking given by 14 organizations and institutions, including Forbes Magazine, which ranked PTT 372 companies (in 2005, number 425); Fortune Magazine, which ranked PTT 265
th
nd
among the top 500 largest
among its Global 500 largest
companies (in 2005, number 373). PTT’s efficient, transparent, and ethical business operation filled with social and environmental responsibility won an outstanding state enterprise award for 2006 from the Ministry of Finance in three categories – outstanding performance, outstanding board of directors, and outstanding social programs. PTT was one of the four winners of the Best Corporate Social Responsibilities (CSR) Awards of the Stock Exchange of Thailand, and was named Best Managed Company and Best Corporate Governance by FinanceAsia Magazine. The last two acclaims were repeats of 2005. The Board of Directors of PTT Public Company Limited managed under the corporate governance with a firm commitment to ethical transactions to foster economic progress together with the improvement of life and the environment. On behalf of the Board, we sincerely thank the shareholders, customers, business partners, financial institutions, the media, employees, and the Thai public for entrusting PTT with these responsibilities and for supporting PTT through the years.
(Mr. Cherdpong Siriwit)
(Mr. Prasert Bunsumpun)
Chairman
President
PTT Public Company Limited
015
REPORT OF THE AUDIT COMMITTEE
(M r . O l a r n C h a i p r a v a t) C h a i r m a n , Au d i t C o m m i t t e e
The Board of Directors of PTT Public Company Limited appointed the Audit Committee, consisting of three independent directors specializing in finance, and organization management, namely: 1. Mr. Olarn
Chaipravat
Chairman
2. Mr. Phadhadej
Dhamcharee
Member
3. Mr. Suchart
Thada-Thamrongvech
Member
During the year, the Committee held 10 meetings with the Management and relevant departments, one of which was with the Management alone. Other meetings were meant to allow critical departments to present their performance, risk management practices, operating problems and obstacles. The Committee held quarterly meetings with the Office of the Auditor General of Thailand (OAG), which served as PTT’s external auditor, to review PTT’s financial statements, audit plan, and OAG’s audit independence. During the year, the Committee performed its duties as assigned by the Board and in compliance with the criteria and practical guidelines governing the Committee, in line with the regulations of the Stock Exchange of Thailand (SET), namely review of corporate governance; review of financial statements; review of risk management; review of internal control assessment; and oversight of internal audits, as summarized below. 1. Review of corporate governance. The Committee ensured transparent information disclosure in line with the announcements of the Securities and Exchange Commission (SEC), SET, and relevant laws. To illustrate, it reviewed the stated number of directorships held by Management team members in listed companies; reviewed connected transactions with a focus on those conducted between the Exploration & Production and Gas Business Group, the Oil Business Group, the Petrochemicals and Refining Business Group, and Head Office, to ensure that all transactions were conducted on an arm’s length basis. 2. Review of quarterly, annual, and consolidated financial statements. This was meant to ensure that PTT observed the accounting standard under the Accounting Act, B.E. 2543 (2000), and the announcements of SEC and SET; that its accounting procedures and financial statements were both accurate and reliable; that adequate and timely information was disclosed in financial statements for the benefit of investors or potential
016
PTT Public Company Limited
investors. The Committee reviewed with the auditor the Company’s complete and accurate financial statements, its adequacy of information disclosure, and adjustments for accounting entries significantly affecting the statements. 3. Review of risk management. To ensure acceptable risk management practices, the Committee directed PTT Group’s work by checking the risk management plan of 2006 and its quarterly achievements according to the plan. The Committee made recommendations on dealing with major risks, including the addition of security measures concerning gas transmission, gas separation plants, and petroleum depots around the country. For these, PTT had formulated preventive and preparedness plans. Provided recommendations on financial and investment risk management, with a focus on PTT Group’s stringent control on investment and risk management of assets and liabilities in foreign currencies to remain balanced and suitable. 4. Review of internal control assessment. PTT has an adequate internal control system for its business, and achieves the objectives of internal control as far as efficiency and effectiveness of resource utilization is concerned including due care of properties, and prevention or minimization of defects, losses, waste, or fraud. The Committee also investigated the reliability of financial and operation reports, compliance with laws, rules, regulations, and Cabinet resolutions. The auditors agreed that no significant findings or shortcomings were encountered. During the year, PTT assessed its internal control against the regulations of the Auditor Commission on internal control standard, B.E. 2544 (2001). The audit result of the internal control by the management and the office of internal audit were found adequate and effective. 5. Oversight of internal audit. The Committee oversaw the conduct of internal audit, the audit plan, and the assessment of the operation, budget, and manpower of the internal audit unit through a review of audit reports of the approved 2006 plans to ensure efficient and effective practices, a sound internal control system, and compliance with relevant laws on securities and exchange, and laws related to PTT’s business. For good corporate governance, the Committee ensured corrective actions of significant items in the audit report. In addition, it deliberated the 2007 audit plan, developed from the findings of internal control assessment and from PTT’s risk base. To institute greater cooperation, knowledge and experience sharing, and to achieve world-class, uniform practices, PTT’s internal auditor and other internal auditors of PTT Group got together during the year and planned inspection of information technology; finance and accounting and operation; safety, occupational health, and the environment; and subsidiaries and associated companies. The goal was to have an audit plan that covered all significant issues; prevented potential risks; and had suitable internal control mechanisms, all these to deal with company-wide risks for the maximum benefit of PTT and shareholders. Managers of the audited departments were also asked to assess the performance of the internal auditors and share their recommendations on the improvement of internal audits. 6. Self-Assessment. The Committee conducted individual (through cross assessment) and collective self-assessment. For the 2006 performance, either method yielded “very good” findings. 7. Review of audit plans and audit independence. The Committee chose the auditor for PTT and recommended its fee to the Board, which would table it for the approval of the shareholders at their annual meeting in 2007. The proposal is to appoint the Office of the Auditor General of Thailand as the auditor for 2007. The Committee values good corporate governance, internal control, and continuous risk management so that PTT may command these same qualities in line with its business, together with reliably accurate accounting practices and financial statements, and compliance with relevant laws and regulations.
PTT Public Company Limited
017
World Petroleum Overview
018
PTT Public Company Limited
WORLD PETROLEUM OVERVIEW World Overview The world economy continued its growth in 2006, as most leading countries on economy found ways to thrive despite a lack of balance in the global economy, plus volatile consumer product prices, financial and capital markets. The International Monetary Fund (IMF) has estimated the world GDP for 2006 at 5.1%, the second highest figure in nearly three decades, eclipsed only by the 2004 GDP growth (5.3%). And because of the healthy economic expansion above 4.5% for a third straight year, the average price of Dubai crude oil in 2006 stood at US$ 61.5/bbl, a 25% rise or US$ 12.3/bbl from last year. Significant price rises with high volatility was the theme of the first three quarters because of political problems in oil-producing nations and those in the Middle East, in particular Nigeria; Iran, with its nuclear energy development projects, and the more intense movement of the nationalist in Africa and South America – with threats of nationalizing multinational oil companies’ assets. Such moves have caused delays to new resource development, efficiency improvement programs, and programs to maintain production levels. Oil production costs have in the meantime risen by up to threefold, especially for new exploration and production projects, not to mention the shortage of experienced personnel. Worldwide capacities of crude distillation units rose by 1.2 million barrels per day (MMbbl/d), outstripping oil demand growth of 0.8 MMbbl/d, resulting in a net growth in refining capacity but also a still-tight market supply, thereby causing fluctuations in the prices of refined products and refining margins. For the latter half of the year, oil prices weakened, and so did refining margins. This has resulted in a net drop in the average refining margins, whereas petrochemical prices, and demand were still high continuously from last year and were growing in line with the economic expansion. Meanwhile, turnarounds of several plants and small capacity additions have resulted in the tight supply during certain periods.
Prices of Dubai Crude, Refined Products, and Gross Refining Margin in 2006 $/bbl Refining margin of Dubai - High Conversion, Singapore * ($/bbl)
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Prices of Dubai Crude and Petrochemical Products in 2006 Petrochemical Price ($/Ton)
Jan.
Feb.
Mar.
Apr.
Crude Oil Price ($/bbl)
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
PTT Public Company Limited
019
Domestic Overview Buoyed by surprising export and service-sector performance, the Thai economy grew by 5% in 2006 against 4.5% recorded in 2005. The positive result help compensate the consumption and investment slowdown caused by high oil prices, low interest rates, and low confidence of consumers and investors. In the latter half of the year, inflation steadily fell along with falling oil prices, thereby causing the average annual inflation rate to stand at 4.7%, slightly higher than the previous year. From early on in the year, the baht steadily strengthened as a result of the eroded confidence in the US dollar, evident in the US economic slowdown. What therefore happened was an enormous influx of new capital to regional securities and financial instrument markets, including Thailand. Toward year-end, the baht has become much stronger than regional currencies, prompting the Bank of Thailand to announce its measures to maintain imported foreign currencies in the short term on December 18, 2006, to stem speculation of the baht. This measure has slightly weakened the baht to an all-year average of 38 against the US dollar. Domestic fuel use, consisting of oil and natural gas, registered a total of 1,260.6 Kbd equivalent, a drop of 0.1% from last year. Thanks to the government’s continued price subsidy, LPG expanded by the highest rate of 14.2% and its extensive use in vehicles continued. On the contrary, diesel consumption fell by 6.2% because of the discontinued price subsidy last year, and gasoline consumption fell by 0.5%. Fuel supply from the domestic production and aboard for petrochemical feedstock totalled at 1,610.1 Kbd equivalent, a 1.6% rise from last year, which signified 62.2% import dependence. Total petroleum exports rose by about 12.9% from last year, registering 210.8 Kbd equivalent, a result of the 2% shrink in domestic consumption. A rise in the domestic petrochemical was in line with the country’s economic expansion.
Outlook for 2007 The world economy is apparently slowing down in 2007; especially the US, where domestic demand will likely be moderated by the stagnant real-estate market, a result of the previously stringent financial policy implementation. Consequently, the central banks in several countries must try to balance inflation control with economic growth. According to analysts, the interest rate policy of the US have peaked and will start declining in 2007 in order to maintain the US economic growth. Meanwhile, interest rate policy in Europe and Japan will continue to rise by 0.25-0.5% to stem inflation, while in Asia the economy looks bright but exports will probably be affected by the economic slowdowns of their business counterparts. IMF has predicted that the world economic growth would slow down to 4.9% in 2007. As regards Dubai crude, its price in 2007 will continue to be balanced with some 5-10% price weakening, and the average is projected at US$ 50-55/bbl. Volatility will continue to prevail as in the past three years. Non-OPEC countries are likely to gain 1-1.8 MMbbl in capacity, which will fairly balance the global call on oil, projected to rise by 1.2-1.5 MMbbl – 50-60% of which will be coming from Asia. A critical development is political problems in oil exporting countries and the Middle East countries, as there is no quick end in sight, thereby causing worries on the part of the oil market and affecting the prices of refined products and refining margins. Volatility will also prevail in the product markets – but prices will decline proportionally to crude prices. Petrochemical prices are projected to remain high, as the incremental demand will outgrow the incremental capacity. New projects are being postponed from 2007 to 2008-2010, particularly in the Middle East countries – which is when the down cycle is expected to begin in earnest.
020
PTT Public Company Limited
As for the Thai economic outlook, the government is speeding up its disbursement of the national budget and continuing its mega-projects to assure investors. The falling interest rates will make domestic investments a key economic driving factor together with exports. Exports will lose some steam in line with the world economy and that of trading partners, and with the stronger baht. According to the National Economic and Social Development Board, the domestic economic growth should register 4-5%, inflation down to 2.5-3%, and refined petroleum products will slow down by 1-2% - as the third gas pipeline has been completed, thereby inducing more gas demand for power generation. The volume of fuel oil expected to be displaced is 14,000 bbl/d, causing gas consumption to rise by 8% in 2007. Also, the call for petrochemical products will amount to 1.2-1.5 times of the GDP growth.
Thailand没s Petroleum Balance in 2006* Unit : Kbd
Supply
Demand/Distribution LPG
Refined Products 25.9 -30.6%
Domestic
(Exclude Petrochemical 85.9 feed stocks)
18.4
14.2%
-15.4%
Domestic
Import 62.2%
Crude Oil 825.5 -0.3%
Combined Capacity of 7 Refineries 1,017 Kbd Utilization Rate 91.0%
Gasoline
Natural Gas 149.5 1.5%
33.1
-0.5%
-5.0% Export
78.2
18.1
5.2%
74.3%
Domestic Diesel
Export
124.3
Domestic Jet / Kerosene
Export
Commercial / Industry / Transport Sector
672.8 -2.1%
Export
316.6
50.7
-6.2%
62.5%
Power Sector
33.1 1.1%
Domestic
LPG form GSPs Fuel Oil
72.3 13.2%
Export
100.8
24.4
-5.7%
57.0%
Export Crude Oil
Crude Oil 129.0 13.3%
Indigenous 37.8%
66.1 0.8%
Condensate 75.4 8.6%
Power Generation
411.1 1.1%
Combined GSP Capacity 1,755 MMcf/d Natural Gas 404.7 2.7%
Gas Use
90.9
8.1%
Industry
50.4 10.5% Oil Gas
Summary 1,260.6
-0.1%
Export
210.8
12.9%
Oil Products
705.9
-2.0%
Refined Products
144.7
18.4%
Natural Gas
554.7
2.4%
66.1
0.8%
Total Demand Total
1,610.1 1.6%
Crude / Condensate
* Source: DOEB, DMF, EPPO, PTT, as of February 9, 2007
PTT Public Company Limited
021
Performance Review
022
PTT Public Company Limited
PERFORMANCE REVIEW It was another remarkable year for PTT and its subsidiaries in business performance and stewardship of society. Business continued to be managed under a synergistic approach known as the PTT Group, which defines strategies to add business value through the PTT Group Value Chain while developing critical processes suitable for current circumstances of volatile economic conditions and energy prices. Notably, for the PTT Group’s highest business efficiency and effectiveness in the move toward a High Performance Organization to contest in the international arena, risk management needs to be implemented together with change management. Recognizing its role as the national oil company, PTT is committed to supporting the government’s energy policy in various aspects: security of supply, promotion of alternative forms of energy to cut imports, and promotion of economical and efficient use of energy. Above all, PTT is committed to laying down a solid foundation for sustainable energy management in line with His Majesty the King’s sufficiency approach, a royal initiative for Thailand.
Exploration & Production and Gas Business Group The year continued to see greater natural gas and product output, rising with elevated prices of petroleum and petrochemicals. To add value to and maximize the benefit of natural gas, new businesses have come into existence, and gas transmission networks have been expanded to meet the rising demand and fulfill national energy security.
Prices of Petroleum and Petrochemicals Incorporating the prices of olefins and aromatics, these continued to be high. The price of Saudi Arabia-based LPG surged from US$ 431/ton to US$ 512/ton, as did the Southeast Asia spot prices of ethylene and propylene – going from US$ 911/ton and US$ 956/ton in 2005 to US$ 1,161/ton and US$ 1,126/ton in 2006. Similarly, the prices of benzene (Bz) and paraxylene (Px) rose from US$ 829/ton and US$ 905/ton in 2005 to US$ 869/ton and US$ 1,080/ton respectively in 2006.
Petroleum Price
Petrochemical Price
Unit : US$/bbl
Unit : US$/ton
1,161 1,126 1,080
76.7 73.1 956
64.0 62.0
47.2 45.7
49.2
61.5
929 849 823 770
911
905 829
49.2
40.8
512
33.7
431 350
28.5
2004
869
2005
2006
2004
2005
Dubai
ULG 95
LPG (CP)
Ethylene
HSD
Fo
Benzene
Paraxylene
2006 Propylene
PTT Public Company Limited
023
Gas Sales
Unit : MMcf/d at 1,000 Btu per Cubic Foot 3,500 3,000
2,773
2,500 2,000 1,500
3,084
2,996 Growth 3%
Growth 8%
389
491
527
251
264
301
417
429
417
723
802
824
993
1,010
1,015
1,000 500 0
2004 EGAT
IPP
2005 Industries
SPP
2006 GSP
Gas Product Sales Unit : Thousand Tons 4,000
3,462
3,500
2,749
3,000 2,500
3,668 Growth 6%
480
Growth 26%
476
418 1,969
1,933
2,000 1,500
1,577
1,000 500
2004 Ethane
Propane
980
832
547
0
239
221
207
LPG
2005
2006
NGL
Natural Gas Distribution Natural gas sales volume totaled 3,084 MMcf/d, a 2.9% rise from last year, resulting from gas producers’ expanded capacity and the emerging transmission capacity of the western pipeline system due to the completed compressor unit at Block Valve Station #7 in Kanchanaburi. This completion allowed gas transmission through the Sai Noi - South Bangkok pipeline to the South Bangkok Power Plant in December 2006. As a result, the gas delivered to power-sector users rose by 0.8% to 2,257 MMcf/d in line with the rising domestic consumption. Also, industrial gas users received 14% more gas, or about 301 MMcf/d, in line with the constantly expanding economy, and gas separation plants received 6.9% more gas to 526 MMcf/d. In summary, PTT sold 73% of the gas to power-sector users, 10% to users in the industrial and transport sectors, and 17% to gas separation plants during the year. Indigenous gas accounted for 73% with the rest coming from Myanmar.
Gas Separation Plant (GSP) Product Sales GSP sales totaled 3,668 thousand tons, a 6% rise from last year. Capacity utilization rates remained high because of the continued efficiency improvement of GSPs. The five GSPs commanded 1,760 MMcf/d in gas feed capacity and their products included ethane, propane, LPG, and natural gasoline. These products served as petrochemical feedstock and fuels for domestic consumption and export.
024
PTT Public Company Limited
GSA signing for use of natural gas in power generation at Bangpakong and South Bangkok
GSA signing for use of natural gas in power generation at Nam Phong, Khon Kaen
Highlights of Exploration & Production and Gas Business Group Securing Supply ●
PTT signed an amendment agreement to the export gas sales agreement as the buyer, with the Yadana
consortium of gas sellers – PTTEP International, Total E&P Myanmar, Unocal Myanmar Offshore, and Myanmar Oil & Gas Enterprise (MOGE) – to raise the daily contract quantity from 525 to 565 MMcf/d, effective September 1, 2006. ●
PTT signed a preliminary agreement with Pars LNG of Iran to import 3 million tons/year (about 400 MMcf/d)
of LNG produced under the Pars LNG Project for 20 years, effective from 2011, to raise the national security of supply and meet the rising and long-term demand for natural gas, in addition to diversifying the sources of energy. Expanding the Market ●
PTT signed the second amendment to the gas sales agreement (GSA) with the Electricity Generating
Authority of Thailand (EGAT), whereby PTT would raise the volume of gas delivered to EGAT to 960 MMcf/d through the expiry of the agreement. The gas would be used in fueling Bangpakong and South Bangkok Power Plants, thereby lowering the volume of fuel oil used for power generation. ●
Natural gas delivery from Myanmar began via the Sai Noi - South Bangkok transmission line, a new
segment of PTT’s western pipeline system, to EGAT’s South Bangkok Power Plant to replace fuel oil. The delivered volume of 50 MMcf/d will in time rise to 160 MMcf/d. ●
PTT and EGAT signed a GSA on the supply of natural gas to the Nam Phong Power Plant. Natural gas
from Phu Hom Field of Udon Thani has been introduced to the plant. Initially, Phu Hom would supply about 30 MMcf/d and this would in time rise to 105 MMcf/d, which, when combined with the Nam Phong gas, would raise the total gas delivery to 135 MMcf/d. ●
PTT, Dhanarak Asset Development Company, and the Metropolitan Electricity Authority (MEA) signed
an agreement on the supply of chilled water to the Bangkok Metropolitan Administration Government Agency Center Project on Chaeng Wattana Road in Bangkok. Under the agreement, Dhanarak will transfer the land for PTT and MEA to build a combined heat and power system plant within one year. PTT will supply natural gas to the plant, which is expected to come on stream by March 1, 2008 under a 30-year contract that ends on June 30, 2038. ●
PTT and Dawood Hercules Chemicals Limited of Pakistan signed a memorandum of understanding for
joint investigation of opportunities to conduct gas business in that country.
PTT Public Company Limited
025
Create Value Through Business Chain
Gas Chain
Upstream
Intermediate
Natural Gas
Exploration & Production (PTTEP)
Pipeline
Oil Chain
Crude & Condensate
Crude Oil Procurement
Trading
Crude & Condensate
Petrochemical Chain
Petroleum Products
026
Olefins & Aromatics Plants
PTT Public Company Limited
Petrochemical Intermediate Plants : MEG, Phenol, etc.
End Customers
Downstream Natural Gas
Electricity
Power Plants District Cooling System
Gas Products Industry
Gas Separation Plants
NGV
Logistics PTT Stations
Oil
LPG
Refineries
Lube Base Plant
Plastic Resins
End Products
Export Markets
PTT Public Company Limited
027
Signing of agreement for chilled-water supply to Government Agency Center Project
Signing of agreement for NGV application in ferries
≈ßπ“¡∫—π∑÷°¢âÕμ°≈ß„™â NGV „π‡√◊Õ‡øÕ√å√’Ë
Promoting Natural Gas for Vehicles (NGV) ●
To promote taxis’ conversion to NGV, PTT launched a conversion program for LPG-powered taxis
and brand-new taxis, with PTT sponsoring up to Baht 30,000 to 40,000 each in conversion costs from May 8, 2006 to the end of April 2007. The target number of taxis was 30,000. ●
PTT and Rooks Homes Company signed an agreement on the installation and retrofitting of NGV
equipment in ferries at the Center Point port in the province of Trat. PTT, Ruea Duan Chao Phraya Company, and GFS Asia Pacific Company (a Diesel Dual Fuel NGV equipment expert) signed an agreement on the installation of NGV equipment in express passenger boats plying the Chao Phraya River. In both cases, the intention was for the two operators to modify or change their diesel engines to NGV. ●
PTT and Bangchak Petroleum Plc. (BCP) launched the first Bangchak NGV service stations and planned
to launch up to 20 stations, with PTT sponsoring the costs of all such stations under the Bangchak brand. BCP is to allocate a certain area at each station for the installation of NGV equipment and NGV sale. PTT and Petronas (Retail) Thailand Company also signed a similar memorandum of understanding on NGV service at Petronas outlets. ●
The Ministry of Energy and PTT launched a program called “Thai NGV, Innovative Motor Fuel” to
drum up support for the use of NGV in the transport sector. Under the program, a memorandum of understanding on a 7,000-million-baht NGV credit program was signed by PTT and eight commercial banks, namely Bangkok Bank, Siam Commercial Bank, Bank Thai, Thai Military Bank, Government Savings Bank, Kasikorn Bank, Bank of Ayudhya, and Krung Thai Bank. Another memorandum of understanding on the promotion of NGV in buses and trucks was signed by PTT and four transport operators, namely Siri Project Construction, Bunyarith Transport Plc., Wangsakankit, and Saraburi Truck Sales Companies on one side, and P.S. Natural Gas Company (an NGV equipment installation expert) and three commercial banks, namely Kasikorn Bank, Bank of Ayudhya, and Krung Thai Bank. The four transport operators were to install or modify their buses and trucks to run on NGV using the credit given by the three banks while PTT was to sponsor the construction of NGV service stations in areas provided by the operators. ●
PTT launched loan service campaigns for NGV installation with GE Capital (Thailand) Co., Ltd., Capital OK
Co., Ltd., and Aeon Thana Sinsap (Thailand) Plc. It also launched “NGV Loan Service at Installation Companies with Thanachart Bank” which customers were offered loans and NGV installation at 10 PTT certified installation companies. These campaigns targeted to encourage the public and operators in transportations sector to use natural gas fuel instead of oil. Moreover, the company extended the “PTT for People” program which would approve Baht 10,000 reduction for every customer who paid for the NGV installation in cash.
028
PTT Public Company Limited
Launch of Thai NGV, Innovative Motor Fuel Project
●
NGV conversion credit project
‚§√ß°“√ ‘π‡™◊ËÕ ”À√—∫μ‘¥μ—ÈßÕÿª°√≥å NGV
Towards the year end, PTT was accelerating the NGV service station expansion to reach 102 stations, with
the aim to alleviate the public burden on fuel prices and attract more people and transport operators to turn to NGV. To this end, PTT still maintains the natural gas price for vehicles at Baht 8.5/kg. until the end of 2007. ●
PTT and Dhiphaya Insurance Plc. signed an agreement on the collaboration to provide insurance for NGV
equipment in cars, whereby PTT would take out insurance against damage to gasoline engines of four-wheeled passenger cars if the damage is due to NGV equipment installation and a new engine is needed. Dhiphaya would take care of the expenses for the new NGV engines to cars that need new NGV engines for up to Baht 60,000 under a one-year protection period. As regards the portion of the cost beyond this limit, PTT would pay the amount. The above conditions applied to NGV engines installed by PTT’s garages and those garages certified by PTT, effective April 26, 2006. ●
PTT and the National Electronics and Computer Technology Center, Ministry of Science and Technology,
signed an agreement on a pilot experiment of the electronics control system (ECU) in NGV engines. This embedded system is the key to efficient distribution of NGV and supports modification to suit engine types, thereby benefiting NGV promotion and development of the domestic motor-engine electronics industry. Expanding the Transmission Network To enhance the potential for natural gas transmission to meet the domestic demand, PTT launched gas transmission pipeline construction to raise the ability to receive natural gas under the modified Third Gas Pipeline Project, 2001-2011, as described below: ●
The offshore portion of the Third Gas Pipeline, due for completion in early 2007, commands 1,900 MMcf/d
in capacity. ●
The onshore portion of the Third Gas Pipeline, due for completion in March 2006, commands 1,200 MMcf/d
in capacity. ●
The Sai Noi - North & South Bangkok Power Plant gas transmission project, designed to expand the network
in Bangkok and its perimeter, was completed in December 2006 with a capacity of 480 MMcf/d. ●
The Wang Noi - Kaeng Khoi gas transmission project, designed to supply natural gas to power plants
and industrial gas users around Amphoe Kaeng Khoi, Sara Buri, started up in October 2006 with a capacity of 510 MMcf/d. ●
Construction of the Compressor Unit Installation Project at Block Valve Station #7, designed to raise the
transmission capacity for the gas from Myanmar to 1,300 MMcf/d, was completed in July 2006.
PTT Public Company Limited
029
Natural Gas Transmission Pipeline System and Future Projects Vietnam Myanmar
Laos
Phu Hom
Thailand
Nam Phong
Ban I Tong Yadana Tha Luang
Kaeng Khoi
Wang Noi Yetagun
Samut Prakan NBK Bang Pakong SBK
Ratchaburi
Chon Buri
Cambodia
ESB Rayong
Thap Sakae
Benchamas Tantawan Platong
Erawan
Khanom
Arthit Pailin Bongkot
Thai
Gas Separation Plant Capacity
030
Unit 1
350 MMcf/d
Unit 2
250 MMcf/d
Unit 3
350 MMcf/d
Unit 4
230 MMcf/d
Unit 5
530 MMcf/d
PTT Public Company Limited
- Malaysia (JDA)
Natural Gas Fields
Songkhla Sadao
EGAT Gas Separation Plant Unit 1, 2, 3, 5 in Rayong
Malaysia
Gas Separation Plant Unit 4 in Nakhon Si Thammarat Existing Pipeline TTM Pipeline
PTTEP Projects Southeast Asia Myanmar
Laos Phu Hom S1
L22/43 E5
Myanmar M3 & M4
Thailand
Yadana
L21, 28 & 29/48 Project
L53/43 & L54/43 Myanmar M7 & M9 PTTEP 1
Myanmar M11
Cambodia
Yetagun B8/32 & 9A G4/43
Vietham
Unocal III G9/43
Nang Nuan
Vietnam 9-2 Combodia B
Andaman Sea
Vietnam 16-1
Pailin
Vietnam B & 48/95 Arthit
Vietnam 52/97
Bongkot MT JDA - B 17
Malaysia
Indonesia Bengara I
Indonesia Merangin I
Oil Field Gas Field
Africa
Middle East Sidi Abd El Rahman Oman 44
433a & 416b
Algeria
Oman
Rommana
Egypt
Middle East Iran Saveh
Iran
Oman 58
PTT Public Company Limited
031
PTT Exploration and Production Plc. In 2006, this exploration and production (E&P) arm of PTT Plc. had a total production of natural gas, crude oil, condensate, and LPG of 169,348 BOED, a 10.3% rise from the previous year. The majority of additional sales volume came from B8/32 & 9A Project; Pailin Field, Bongkot Field, Yadana Field (natural gas); and S1 Project (crude oil). The average product price for the year equaled US$ 36.5/bbl equivalent, a 24.3% rise from last year.
Highlights of PTTEP Performance in 2006 ●
PTTEP Siam Co., Ltd. (the seller) signed a GSA with Ratchaburi Energy Co., Ltd. (the buyer), covering
0.4 MMcf/d over a period of eight years. Successful experimental power generation was conducted in late 2006; this was in fact a milestone in the application of flared gas from Pratu Tao-A Field under S1 Project for power generation, substituting fuel oil. ●
Located between Udon Thani and Khon Kaen, Phu Hom Project successfully produced natural gas for
delivery to Nam Phong Power Plant. With a start-up date in late 2006, the field is projected to deliver an initial average rate of 60 MMcf/d, to rise to more than 100 MMcf/d of natural gas and condensate. PTT buys gas from this project under a GSA previously signed and will deliver it to Nam Phong Power Plant for at least 15 years. The deal enhances the security of power supply for the Northeast. ●
According to the Arthit Project GSA previously signed by PTTEP, the company had projected a flow rate
of 330 MMcf/d by the first quarter of 2008. With the rising demand for natural gas, PTTEP rented a floating production storage and offloading tanker to speed up 120-150 MMcf/d greater production for a minimum of three years. ●
PTTEP Oman Co., Ltd., signed an exploration and production sharing agreement for Block 58 in the
Sultanate of Oman, and will operate this wholly-owned acreage. ●
PTTEP Bengara I Co., Ltd. (PTTEPB), and PT Medco E&P Bengara signed a farm-in/farm-out agreement
for the Bengara I block on the east coast of Kalimantan, Indonesia. The Indonesian company, which operates the block, holds a 60% interest and PTTEPB holds the rest. This represented PTTEP’s second exploration venture in that country.
032
PTT Public Company Limited
●
PTTEP Vong Vu Co., Ltd., SOCO Vietnam Ltd., and Petrovietnam Exploration and Production Company
jointly invested in Vietnam 9-2 Project, which has secured approval for commercial development from the Vietnamese government. Crude oil production of about 20,000 bbl/d is projected to start in late 2007. ●
PTTEP (Thailand) Co., Ltd. (PTTEPT), and Unocal Andaman Ltd. jointly held the G9/48 concession in the
Gulf of Thailand, with PTTEPT serving as the operator, holding an 84% interest. ●
PTTEPT, Total E&P Thailand, and Thai Energy Co., Ltd., jointly held the G12/48 concession in the Gulf
of Thailand, with PTTEPT serving as the operator. The shares held by the three respective partners were 44.4445%, 33.3333%, and 22.2222%. ●
PTTEP Siam Co., Ltd. (PTTEPS) served as the operator of the L21/48, L28/48, and L29/48 concessions
in the Northeast with no other partner involved. ●
PTTEP, Sipetrol International S.A., Edison International SpA, and Centrica Energy have won its preliminary
bid from Egyptian National Gas Holding Company, organizer of the EGAS International Bid Round 2006, to conduct E&P in Block 2, also known as Rommana, near the Cape of Sinai in that country’s northeast; and in offshore Block 8, also known as Sidi Abd El Rahman, in the northwest. This represented PTTEP’s investment expansion in North Africa, another high-potential region. ●
PTTEP has set up the following subsidiaries in support of E&P work in several countries. Each has
a US$ 50,000 paid-up registered capital. 1) PTTEP Bahrain Co., Ltd., wholly owned by PTTEP Oman Co., Ltd. 2) PTTEP Holding Co., Ltd., wholly owned by PTTEP Offshore Investment Co., Ltd. 3) PTTEP Indonesia Co., Ltd., wholly owned by PTTEP Holding Co., Ltd. 4) PTTEP Bengara I Co., Ltd., wholly owned by PTTEP Indonesia Co., Ltd. On April 12, 2006, PTTEP registered a reduction in the par value of its shares from five to one baht in accordance with a resolution of the 2006 annual general meeting of shareholders, and amended the number of common shares in the articles of association from 664,400,000 to 3,322,000,000.
PTT Public Company Limited
033
Oil Business Group The Oil Business Group sells refined products and lubricating oil products to three major domestic segments: retail, wholesale, and commercial marketing. Retail marketing is conducted through service stations. Wholesale marketing has Article 7 traders as customers. Commercial marketing deals with government agencies, state enterprises, industrial users, airlines, and marine transport operators. Domestic sales in 2006 fell by 3.3% from last year to 14,310 million liters because of higher oil prices. As world oil prices rose, however, PTT was the last brand to raise gasoline and diesel prices to shoulder the burdens of consumers. As a result, PTT’s market share rose to 34.9% in the 14th consecutive year of market leadership, through 1,229 service stations, or 6.8%. Of all oil companies, PTT commanded the highest number of service stations and constantly developed them to feature a complete range of services to customers and command an innovative and convenient reputation, together with sophisticated fuels for maximum customers’ satisfaction. The Company commanded 13 aviation refueling stations and over 22 oil and LPG terminals nationwide to reach its customers and support its own business.
Sales Volume for Domestic Oil Markets
Domestic Market Shares : Continuously as Market Leader
Unit : Million Liters
16,000 14,000
13,937 Growth 6%
Unit : %
14,802 Growth 3%
3,439
3,359
12,000 10,000 8,000
5,250
6,000
1,223
4,000 2,000
14,310 2,584 5,615
5,679 1,125
1,256
1,922
1,987
2,155
2,183
2,572
2,700
24.6%
26.5%
34.6%
7.1%
34.9%
6.6%
9.8% 12.1%
11.8%
9.7%
11.7%
10.6%
0
2004 LPG Gasoline
034
2005 Jet/Kerosene Diesel
PTT Public Company Limited
2006 Fuel Oil
2005 PTT Shell
2006 Esso Caltex
Bangchak Others
New-look PTT Park service station
Signing of supply agreement for marine-vessel fuels
Highlights of Oil Business Group Expanding the Market ●
Since October 1, 2006, over 1,200 PTT service stations nationwide have launched PTT Gasohol 95 Plus,
the highest number nationwide. To get itself prepared, PTT joined ethanol producers in further cooperation to meet consumers’ demand in all corners of the country. ●
A new look has emerged for PTT service stations. “PTT Park” provides a complete range of fuels and
alternative energy forms, including PTT Alpha-X 91, PTT Alpha-X 95, PTT Gasohol 95 Plus, and PTT Biodiesel, together with supplementary businesses to meet the demand of customers. Chosen popular brands with outlets inside PTT service stations now include a Drive-Thru Banking for the Bank of Ayudhya, 7-11, Café Amazon, Progress Pharmacy, Mister Donut, Chester Grill, S&P, Nai In, Nai Malakaw, and Petty shop. All these for customers’ shopping convenience. ●
PTT and Toyota Motor Thailand Co., Ltd., signed an agreement on the supply of fuels and fuel storage
equipment. Under the agreement, PTT is to supply five million liters per year of PTT Alpha-X 95 and PTT Delta-X Euro III, worth about Baht 140 million, to Toyota’s new, 400,000-car/year production and assembly center at Ban Pho, Chachoengsao, and to build quality fuel storage and distribution equipment equipped with standard, safety, and compliance with the law. This represented PTT’s milestone success in expanding to the automotive industry. ●
PTT and five marine-vessel operators (Wong Samut Nawee, World Bunker, Max Energy (1998), Marine Oil
International, and RCL Feeder Co., Ltd.) signed an agreement on marine bunker oil supply of 500 million liters/year, worth over Baht 7,500 million, and launched the PTT Bunker Center at the Sriracha Petroleum Terminal. The terminal is a modern distribution center for refined products, lubricating oil, and cargo vessels, with the potential for several aspects. This represented PTT’s successful expansion into cargo vessels. ●
PTT and Sojitsu (Thailand) Co., Ltd., signed an agreement on the supply of 1.2 million liters/year of
lubricating products. Sojitsu is a producer and distributor of Yanmar agricultural bulldozers and machinery. The intention is for agricultural customers to get international-quality products. ●
With the government’s reduction in the contribution to the Oil Fund for diesel, amounting to Baht one/liter
from Baht 1.95/liter, PTT cut its retail diesel price by the same margin immediately to alleviate the impacts of rising oil prices, effective April 28, 2006.
PTT Public Company Limited
035
PTT Petroleum, Oil, LPG Terminals, and Aviation Fuel Stations Vietnam Myanmar
Laos
Chiang Rai
Chiang Mai Lampang
Udon Thani Den Chai
Phitsanulok Khon Kaen Nakhon Sawan
Thailand
Nakhon Ratchasima
Saraburi Bang Pa-in
Ubon Ratchathani
Lam Luk Ka Phra Khanong Bangchak
Samut Sakhon Si Racha Ban Rong Po Utapao
Cambodia
Hua Hin
Surat Thani Pak Phanang Nakhon Si Thammarat
Krabi
Songkhla
Phuket
Hat Yai
Petroleum Terminal LPG Terminal Oil Terminal
Malaysia 036
PTT Public Company Limited
Aviation Fuel Station Note :
Petroleum Terminal Comprises of Oil and LPG Terminal
Signing of MOU for biodiesel from oil palm project development
●
Support to alternative-energy policy through innovative used-plastics conversion into crude oil for domestic consumption
As the national oil company, PTT stood ready to support the government’s actions to alleviate the hardship
of consumers. PTT cut its diesel price for buses under the Bangkok Mass Transit Authority and the Transport Co., Ltd., that directly received fuel from PTT at a special discount of one baht/liter for a period of three months, effective May 15, 2006. Both agencies had a monthly demand of 15 million liters of diesel, making the total volume for three months 45 million liters.
Developing Products and Services ●
PTT came up with the latest formula for the Performa Super Synthetic lubricating oil, which was regarded
as “the Best of the Best.” This 100% synthetic gasoline lubricating oil, manufactured to the ILSAC GF-4 standard, is also known as “Di-Synthetic Protect.” Designed for modern cars with high performance, it adds even more performance to engines, enabling them to accelerate and pass while maintaining engine conditions like new. Lubrication starts immediately with engine ignition, with minimum engine wear from ignition. Usable for up to 20,000 km., Performa Super Synthetic also saves 5-8% fuel. ●
PTT and Thaksin Palm (2521) Co., Ltd., signed a preliminary agreement, as did PTT and Bioenergy Plus Co., Ltd.,
to jointly investigate the production of methyl ester from oil palm for use as a core raw material for biodiesel, which would represent PTT’s commercial expansion of biodiesel production, thereby adding to its potential for biodiesel promotion. The cooperation with Thaksin Palm was for the construction of a B100 biodiesel plant with a capacity of 300,000 liters/day in Surat Thani, using CPO raw palm oil. Completion is due in 2008. The cooperation with Bioenergy Plus was for the construction of a B100 biodiesel plant with a capacity of 200,000 liters/day at Bang Pa-in Industrial Estate, Ayutthaya, using stearin or palm wax obtained from palm oil refiners as a raw material. Completion of this plant is due in 2007. ●
PTT, BCP, and Single Point Energy and Environment Co., Ltd., signed a memorandum of understanding
on joint technical and commercial marketing development in support of the national alternative-energy policy. This is an innovative technique of converting used plastics into oil. ●
PTT, Toyota Motor Thailand Co., Ltd., Toyota Technical Center Asia Pacific (Thailand) Co., Ltd., and Kasetsart
University signed an agreement on project research and development for biodiesel from jatropha (curcas) seeds for diesel engines in response to the alternative-energy initiatives of HM the King. ●
PTT, the Mitr Phol sugar-producing group, and Thai Alcohol Plc. signed an agreement on the supply of
molasses and anhydrous ethanol (99.5% pure), whereby Mitr Phol and Thai Alcohol were to jointly supply 160,000 tons of molasses as the raw material for the production of 40 million liters of anhydrous ethanol, which was to be sold to PTT, which would then produce PTT Gasohol 95 Plus from June to the end of 2006. As a result, consumers had access to this alternative fuel at Baht 1.50/liter lower than premium gasoline. ●
PTT and Fa Khwan Thip Co., Ltd., signed a memorandum of understanding on the supply of 60,000 liters/day
of converted anhydrous ethanol for the production of PTT Gasohol 95 Plus. PTT Public Company Limited
037
Signing of condensate market development agreement with Petronas
Signing of Oman crude oil supply agreement
Signing of Jasmine crude oil supply agreement
International Trading International trading covers crude oil, condensate, refined fuels, and petrochemical products, with a traded volume of 35,270 million liters during the year, a 10.7% rise from last year. Accounting for this rise were greater volumes of crude oil, condensate, and refined fuels, including out-out trading.
Highlights of International Trading ●
PTT and Petronas Trading Corporation Sdn. Bhd. (PETCO) signed a joint marketing agreement for the
Cakerawala condensate, obtained from the Malaysia-Thailand Joint Development Area (Block A-18). Currently averaging for 3,000-5,000 bbl/d, the capacity is projected to rise to 8,000-10,000 bbl/d in 2007. The condensate is to be used in oil refineries and petrochemical plants in both countries. ●
PTT, PTTEP, and PTTEP Oman Co., Ltd., signed an Oman crude oil supply agreement, marking the
first time PTT had bought from PTTEP crude oil produced from an external source. Under the agreement, PTT was to take all of the output in fulfillment of the national policy to enhance the security of energy supply while bringing in greater revenue. ●
PTT and Pearl Oil (Thailand) Co., Ltd., signed a crude oil supply agreement, whereby PTT was to take up
all the oil produced from Jasmine Field by Pearl Oil. The field currently commanded a 10,000-barrel/day capacity, worth over Baht 9,000 million/year. This represented PTT’s milestone move for enhancing energy sufficiency for the nation and lowering dependence on oil imports.
Sales Volume for International Trading Unit : Million Liters 40,000
31,863
35,000
25,692
30,000 25,000
Growth 24%
4,047 1,871 3,563
20,000 15,000 10,000
35,271 Growth 11%
2,025 4,337 4,336
2,115 3,066 3,681
24,573
23,001
16,211
5,000 0
2004 Crude Oil
038
Condensate
PTT Public Company Limited
Refined Products and Others
2005 Petrochemical
2006
Petrochemicals and Refining Business Group The business group funded investment for PTT Group subsidiaries. During the year, the group restructured its business for greater focus, specifically by allowing PTT Chemical Plc. (PTTCH) to serve as the core olefins business leader and by expanding investment or joint investment into midstream and downstream businesses to add value, strength, and advantage. Another milestone was reached when PTT took Thai Petrochemical Industries Plc. (TPI) out of the business rehabilitation plan and restructured its management. In the meantime, the refining group expanded its investment to add production efficiency and listed Rayong Refinery Plc. (RRC) on the Stock Exchange of Thailand (SET).
Highlights of Petrochemicals Business ●
The Aromatics (Thailand) Plc. (ATC) expanded its feed fractionation revamp project to raise its condensate
processing capacity from 50,000 to 70,000 bbl/d, and completed its cyclohexane project with a capacity of 150,000 metric tons/year (MTA). At the same time, the paraxylene capacity was raised by 35,000 to 530,000 MTA. ●
ATC and RRC signed the heads of agreement for investment expansion projects for both companies, worth
about US$ 1,073 million, whereby RRC was to invest in a Reforming Complex and an Upgrading Complex while ATC was to invest in the Aromatics Complex. When completed in the third quarter of 2008, RRC’s crude oil and feedstock refining capacity would rise from 145,000 to 210,000 bbl/d and ATC’s production capacity would rise from 1,098,000 to 2,137,000 MTA. ●
ATC and TPT Petrochemicals Plc. signed a paraxylene sales agreement for the product obtained from the
Aromatics Complex II, a volume of 100,000 MTA for eight years, worth US$ 640 million. Paraxylene serves as feedstock for the production of PTA (purified terephthalic acid). The start-up of the complex is due in the third quarter of 2008.
ATC and RRC signed the heads of agreement for investment expansion projects
Signing a memorandum of understanding on the production of methyl methacrylate
PTT Public Company Limited
039
PTT Group Product Chain in Petrochemicals Business
●
PTT, Asahi Kasei Chemicals Corporation (AKCC), and Marubeni Corporation signed a memorandum of
understanding on a joint investment in an acrylonitrile (AN) project with a capacity of 200,000 MTA through a new technology based on propane obtained from PTT’s gas separation plants. PTT Asahi Chemical Co., Ltd., will be formed by the three signatories at investment proportions of 47.5%, 47.5%, and 5% respectively. The start-up is projected for early 2010. ●
PTT and AKCC signed a memorandum of understanding on the production of methyl methacrylate (MMA)
with a capacity of 70,000 MTA using core raw materials obtained from AN as feedstock. The investment proportions were 49% and 51% respectively. Like the AN project, the start-up is projected for early 2010.
040
PTT Public Company Limited
●
PTT bought shares in HMC Polymers, a polypropylene (PP) operator with a capacity of 420,000 MTA.
Consisting of 12,900,685 recapitalization shares and 2,806,373 existing shares, the purchase was worth about Baht 9,089 million. As a result, PTT now held 41.443% equity in HMC. ●
PTT bought all 100,000 common shares in PTT Polymer Marketing Co., Ltd. (PTTPM), held by Bangkok
Polyethylene Plc. (BPE), accounting for 25% of PTTPM, at Baht 100/share for a total payment of Baht 10 million. As a result, PTT and PTTCH now held 75% and 25% equity in PTTPM.
PTT Public Company Limited
041
●
PTT sold all the shares in PTT Polyethylene Co., Ltd. (PTTPE) and BPE to PTTCH, amounting to 11.5
million and 85 million shares respectively, receiving in return Baht 1,750 million and Baht 2,000 million. As a result, PTTCH has become the major shareholder of PTTPE and BPE, with 99.99% of the paid-up shares in each of the two companies. ●
On April 26, 2006, TPI Plc. and its six affiliates, namely TPI Oil, Thai ABS, TPI Aromatics Plc., Thai Polyurethane
Industries, TPI Power Generation, and TPI Polyol Co., Ltd., left the business rehabilitation plan under a directive of the Central Bankrupty Court. ●
On October 31, 2006, TPI Plc. registered with the Ministry of Commerce its name change to IRPC Plc.,
now known in the local bourse as IRPC. ●
PTT modified the investment plan for TOC Glycol Co., Ltd. (TOCGC), wholly owned by PTTCH, by abandoning
the EO/EG II project, previously designed with a capacity of 300,000 tons/year of monoethylene glycol (MEG) because of rising plant construction and equipment costs. Instead, the MEG capacity was to be raised through capacity expansion of the EO/EG I plant by 95,000 tons/year. Completion is projected for the first quarter of 2008. TOCGC is the first producer of MEG in Thailand, with a start-up in 2006 of the 300,000-tons/year plant. ●
PTT formed PTT Polymer Logistics Co., Ltd. (PTTPL), to manage its integrated logistics – from packaging,
storage, warehouse administration, and polymer transport under the PTT Group to domestic customers and worldwide – to raise its potential and international competitive edge.
Highlights of Refining Business ●
Thai Oil Plc. (TOP) implemented its Hot Oil Project to raise its capacity from 220,000 to 225,000 bbl/d and its
mercury removal unit for its crude feed, thereby enabling TOP to process a greater volume of oil while lowering its costs. Both projects were completed in June 2006. ●
TOP, Padaeng Industry Plc., and Petrogreen Co., Ltd., jointly formed Mae Sot Clean Energy Co., Ltd., to
build and operate an ethanol plant with a capacity of 100,000 liters/day at Amphoe Mae Sot, Tak. The shareholding proportions were 30%, 35%, and 35%. ●
BCP sold its recapitalization shares and converted debentures to PTT amounting to US$ 120 million at
Baht 14 each, thereby raising PTT’s equity to 29.75%. Both parties also signed an agreement on the supply of crude oil to lower BCP’s costs and transport expenses, and an agreement on refined-product purchase from BCP Refinery with the completion of BCP’s product quality improvement project. ●
On June 5, 2006, RRC sold common shares to the public in its initial public offering on SET at Baht 18/share,
thereby dropping PTT’s equity in RRC to 48.75%.
Business Strategies and Directions of PTT Group Two core business strategies remain at PTT: core value creators and integrated value enhancers. Consisting of E&P and Gas Business Group and focusing on domestic and international business expansion, the first strategy stresses robust and sustainable growth. The second strategy – consisting of Oil Business Group, Petrochemicals and Refining Business Group, and International Trading – stresses business restructuring, mergers and acquisitions, and prudent expansion along with efficiency improvement, the creation of synergy of the PTT Group, and capacity building for business expansion and cost-effective investment management. To enable PTT management to follow its strategies and directions, PTT’s enterprise plan for 2007-2011 features investment in plans and projects and joint-venture companies at a budget of Baht 210,318 million, most of which (84%) were investments in the Exploration & Production and Gas Business Group, with 3% accounted for by the Oil Business Group and 4% by the Petrochemicals and Refining Group. Of the first portion, notable projects included the expansion of gas transmission capacity under the modified Third Gas Pipeline Master Plan, gas separation plants, cogeneration, combined-cycle power plants, and investments in independent and small power producers.
042
PTT Public Company Limited
PTT Group Refineries
Bangkok
Thailand
Chon Buri
Gulf of Thailand Rayong
Bangchak Petroleum Plc. Capacity 120,000 barrels/day Approximately 12% share of refining capacity in Thailand
Rayong Refinery Plc. Capacity 145,000 barrels/day
Thai Oil Plc.
Approximately 14% share of refining capacity in Thailand
Capacity 225,000 barrels/day Approximately 22% share of refining capacity in Thailand
IRPC Plc. Capacity 215,000 barrels/day
Star Petroleum Refining Co., Ltd.
Approximately 21% share of refining capacity in Thailand
Capacity 150,000 barrels/day Approximately 15% share of refining capacity in Thailand
Summary In 2006, PTT Group saw a steady rise in sales volume, revenue, and net income. PTT is the largest listed company on SET with a market capitalization of about Baht 589,034 million as at year-end, or about 11.6% of the entire bourse. Combined with the other listed companies under the PTT Group, the market capitalization value is roughly Baht 1,339,721 million, or 26.4% of SET. PTT’s operating and management performance is internationally renowned. The Company is ready to forge ahead to the international arena by nurturing its business potential together with environmental stewardship and social responsibility – all of this for sustainable development and the maximum benefit to stakeholders.
PTT Public Company Limited
043
044
PTT Public Company Limited 50.00 50.00 40.00 35.00 26.00 20.00 15.00
Trans Thai-Malaysia (Thailand) Co., Ltd. (TTM (T))
Trans Thai-Malaysia (Malaysia) Co., Ltd. (TTM (M))
PTT Utility Co., Ltd. (PTTUT)
District Cooling System and Power Plant Co., Ltd. (DCAP)
Thaioil Power Co., Ltd. (TP)
Independent Power (Thailand) Co., Ltd. (IPT)
Ratchaburi Power Co., Ltd. (RPCL)
50.00 20.00 13.33
Energy Complex Co., Ltd. (EnCo)
PTT ICT Solutions Co., Ltd. (PTTICT)
Dhipaya Insurance Plc. (TIP)
Percentage
58.00
PTT Natural Gas Distribution Co., Ltd. (PTTNGD)
Others Business Group
66.13
100.00
PTT Exploration and Production Plc. (PTTEP)
PTT LNG Co., Ltd. (PTTLNG)
Percentage
Exploration & Production and Gas Business Group
PTT AND ITS AFF ILIATES
35.00 34.04 25.00 16.67 15.00
Petro Asia (Thailand) Co., Ltd. (PA (Thailand)) Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) Petro Asia (Huizhou) Co., Ltd. (PA (Huizhou)) Intoplane Services Co., Ltd. (IPS) Petro Asia (Shantou) Co., Ltd. (PA (Shantou))
2.76
40.00
Keloil-PTT LPG Sdn. Bhd. (KPL)
Fuel Pipeline Transportation Co., Ltd. (FPT)
45.00
Vietnam LPG Co., Ltd. (VLPG)
7.06
48.95
Thai Lube Blending Co., Ltd. (TLBC)
Bangkok Aviation Fuel Service Plc. (BAFS)
49.00
PTT Mart Co., Ltd. (PTTMART)
100.00
PTT International Trading Pte., Ltd. (PTTT) 49.00
100.00
Subic Bay Energy Limited (SBECL)
Retail Business Alliance Co., Ltd. (RBA)
100.00
Percentage PTT (Cambodia) Co., Ltd. (PTTCL)
Oil Business Group
Bangchak Petroleum Plc. (BCP)
Star Petroleum Refining Co., Ltd. (SPRC)
Rayong Refinery Plc. (RRC)
Thai Oil Public Co., Ltd. (TOP)
IRPC Public Co., Ltd. (IRPC)
PTT Phenol Co., Ltd. (PPCL)
HMC Polymers Co., Ltd. (HMC)
PTT Asahi Chemical Co., Ltd. (PTTAC)
The Aromatics (Thailand) Plc. (ATC)
PTT Chemical Plc. (PTTCH)
PTT Polymer Marketing Co., Ltd. (PTTPM)
PTT Polymer Logistics Co., Ltd. (PTTPL)
29.75
36.00
48.75
49.54
31.50
40.00
41.44
47.50
49.82
55.19
75.00
100.00
Percentage
Petrochemicals and Refining Business Group
REVENUE STRUCTURE OF PTT AND SUBSIDIARIES BY PRODUCT LINE Product / Service
% Shareholding
2004
2005
2006
of the
(Audited)
(Audited)
(Audited)
Operated by
Company
1. Natural Gas Products
PTT Plc. (Exploration & Production and Gas Business Group) PTT Plc. (Oil Business Group) PTT Exploration and Production Plc. (PTTEP) PTT Natural Gas Distribution Co., Ltd. (PTTNGD)
/1 58.00
Less PTTEP’s gas revenue paid by PTT Plc. Less Petroleum Royalty and Benefits
Million Baht
%
Million Baht
%
Million Baht
%
153,541.61
22.56
178,518.61
18.65
187,092.98
23,884.85
3.51
29,387.75
3.07
30,643.34
14.78 2.42
28,385.36
4.17
33,435.99
3.49
40,870.67
3.23
1,652.55
0.24
2,605.46
0.27
3,291.75
0.26
(26,314.75)
(3.87)
(30,377.44)
(3.17)
(37,981.76)
(3.00) (1.02)
(5,667.98)
(0.83)
(8,981.95)
(0.94)
(12,848.71)
Total Revenue from Natural Gas Products
175,481.64
25.78
204,588.42
21.37
211,068.27
16.68
2. Oil Products
383,966.40
56.41
582,883.80
60.88
791,220.93
62.52
PTT Plc. (Oil Business Group) PTT Exploration and Production Plc. (PTTEP)
/1
Less PTTEP’s crude revenue paid by PTT Plc.
3.44
45,468.59
3.59
(2.68)
(31,719.29)
(2.51)
100.00
196.01
0.03
-
-
-
-
100.00
6,756.74
0.99
19,196.90
2.01
23,393.95
1.85
PTT (Cambodia) Co., Ltd. (PTTCL)
100.00
796.42
0.12
1,277.65
0.13
2,080.86
0.16
Retail Business Alliance Co., Ltd. (RBA)
49.00
31.59
0.00
196.90
0.02
298.71
0.02
Subic Bay Group
100.00
9,352.57
1.37
12,624.41
1.32
14,413.67
1.14
/2
20,954.55
3.08
28,435.17
2.97
12,288.59
0.97
55.00
1,817.68
0.27
-
-
-
-
424,841.98
62.42
651,892.11
68.09
857,446.01
67.76
41,176.74
6.05
52,678.03
5.50
68,345.37
5.40
1,597.06
0.23
5,323.54
0.56
106.77
0.01
Total Revenue from Oil Products PTT Plc. (Oil Business Group) Bangkok Polyethylene Plc. (BPE)
/3
PTT Polymer Marketing Co., Ltd. (PTTPM)
75.00
-
-
6,941.29
0.73
21,748.13
1.72
PTT Chemical Plc. (PTTCH)
55.19
-
-
2,733.31
0.29
41,814.68
3.30
HMC Polymers Co., Ltd. (HMC)
41.44
-
-
-
-
3,390.87
0.27
42,773.80
6.28
67,676.17
7.07
135,405.82
10.70 0.02
Total Revenue from Petrochemical Products District Cooling Systems and Power Plant Co., Ltd. (DCAP)
35.00
-
-
-
-
298.00
PTT Utility Co., Ltd. (PTTUT)
40.00
-
-
-
-
369.25
0.03
PTT Chemical Plc. (PTTCH)
55.19
-
-
-
-
2,940.87
0.23
Total Revenue from Utilities Products 5. Revenue from Services
32,921.60 (25,644.32)
PTT International Trading Pte., Ltd. (PTTT)
Thai Lube Base Co., Ltd. (TLB)
4. Utilities Products
2.62 (2.47)
PTT Philippines, Inc. (PTTPI)
Rayong Refinery Plc. (RRC)
3. Petrochemical Products
17,813.27 (16,843.25)
PTT Exploration and Production Plc. (PTTEP)
/1
-
-
-
-
3,608.12
0.29
1,596.13
0.23
1,997.45
0.21
2,928.09
0.23
PTT Chemical Plc. (PTTCH)
55.19
-
-
115.19
0.01
2,032.48
0.16
Trans Thai-Malaysia (Thailand) Co., Ltd. (TTM (T))
50.00
-
-
-
-
1,386.98
0.11
Trans Thai-Malaysia (Malaysia) Co., Ltd. (TTM (M))
50.00
-
-
-
-
69.81
0.01
PTT Natural Gas Distribution Co., Ltd. (PTTNGD)
58.00
-
-
-
-
39.70
0.00
1,596.13
0.23
2,112.64
0.22
6,457.06
0.51
644,693.55
94.72
926,269.34
96.75
1,213,985.28
95.93
8,788.84
1.29
9,435.67
0.99
15,296.85
1.21
425.67
0.06
0.69
0.00
9,924.88
0.78
Total Revenue from Services Total Sales from Products and Services 6. Others 6.1 Other Revenue 6.2 Gain (Loss) from Foreign Exchange 6.3 Income from Sale of Securities Total Other Revenue 7. Share of net income (loss) from Investments under Equity Method Grand Total
-
-
-
-
7,130.48
0.56
9,214.51
1.35
9,436.36
0.99
32,352.21
2.56
26,741.97
3.93
21,651.26
2.26
19,139.45
1.51
680,650.03
100.00
957,356.96
100.00
1,265,476.94
100.00
/1
PTT owned 63.98%, 66.32%, and 66.13% equity interest of PTTEP in 2004, 2005, and 2006.
/2
On May 5, 2006, RRC conducted its Initial Public Offering (IPO) for recapitalization and existing common shares on SET, thereby reducing PTT’s equity in RRC from 100% to 48.75%
/3
On October 2, 2006, PTT sold all common shares in BPE to PTTCH.
and transforming RRC from a subsidiary to an associated company.
PTT Public Company Limited
045
Connected Transactions
046
PTT Public Company Limited
CONNECTED TRANSACTIONS Connected transactions resulted from contractual agreements of the following types:
(1) Transactions between PTT and state enterprises Transaction By resolution of the Cabinet dated November 26, 2002, government agencies and state enterprises buying 10,000 liters of fuel and more must do so from either PTT or Bangchak Petroleum Public Company Limited only. PTT sold fuels to the following state enterprises: Electricity Generating Authority of Thailand, Bangkok Mass Transit Authority, and State Railway of Thailand. Should a state enterprise have outstanding debts, the Company can levy interests.
(2) Transactions between PTT and subsidiary PTTEP Public Company Limited (PTTEP) Transaction PTT concluded long-term purchase agreements with PTTEP for crude oil, natural gas, liquefied petroleum gas (cooking gas), and condensate, effective each time with the latter’s production project start-up. The transactions followed supply agreements through each project’s life. In 2006, PTTEP supplied 82.82% of its production to PTT at the same prices sold by its partner(s) under each project.
(3) Transactions between PTT and affiliated refining companies Transaction PTT signed crude oil and refined product supply agreements with its affiliated refining companies at rates corresponding to its own equity in each refinery. The agreements are summarized below.
Agreement with Thai Oil Public Company Limited (TOP) PTT contractually takes crude oil and products equivalent to 49.99% of TOP’s refining capacity. Through a written notice sent at least 12 months in advance, either party may revoke this agreement from the 13th year from the date of completion of its refinancing. Alternatively either party may revoke the contract if it deems the contract violated. Under the contract, PTT may buy the volume more than 49.99% at market prices. PTT secures crude oil for TOP under the Phet crude sales agreement, in effect since 1985, which spans the life of the field. As for Jasmine crude, PTT secures supply for TOP under a one-year agreement, effective from January 1, 2006 to December 31, 2006.
Agreement with Rayong Refinery Public Company Limited (RRC) Each RRC shareholder is required to buy refined products from RRC at no less than 70% of its refined products at domestic market prices under a 12-year agreement from the date of commercial start-up, beyond which the contract is assumed to continue unless otherwise notified in advance. PTT secures crude oil for RRC under an interim crude supply agreement; effective from February 9, 2006 to the effective termination date of RRC’s operating alliance, and a feedstock supply agreement, effective from the termination date of the Operating Alliance to February 8, 2024. Under these agreements, PTT would secure crude oil and all other feedstock for RRC for the grades and volumes needed by RRC at market prices.
PTT Public Company Limited
047
PTT signed a New Complex Product Offtake Agreement with RRC, effective from February 9, 2006 to February 8, 2024, whereby PTT would buy from RRC all the products derived from the Reforming Complex and the Upgrading Complex. At least half of these products will be based on domestic market prices and the rest at export prices.
Agreement with Star Petroleum Refining Company Limited (SPRC) Shareholders of SPRC are required to secure crude oil and take delivery of refined products from SPRC at no less than 70% of its 126,000 bbl/d capacity - or 88,200 bbl/d - at domestic market prices. For any surplus volume, PTT and Chevron (Thailand) Ltd. - as shareholders - have the first right to buy at domestic market prices before any sale by SPRC to a third party.
Agreement with Bangchak Petroleum Public Company Limited (BCP) PTT secures crude oil for BCP under the Phet crude supply agreement, in effect since 1985, which spans the life of the field. Likewise, PTT secures crude oil under the Pattani crude supply agreement for 5 years, effective from January 26, 2005 to December 31, 2009. PTT secures crude oil for BCP under a feedstock supply agreement, effective May 16, 2006 for a period of 12 years from the commercial operation date of the Product Quality Improvement Project, whereby PTT would secure all the crude oil for BCP. PTT concluded a product off take agreement with BCP, effective May 16, 2006 for a period of 12 years from the Commercial Operation Date: COD of the Product Quality Improvement Project, whereby after the date PTT would take delivery of at least 30% of BCP’s capacity each month.
(4) Transactions between PTT and affiliates in the petrochemical business group Transactions and agreement with PTT Chemical Public Company Limited (PTTCH) PTT Chemical Public Company Limited was the result of the merger between Thai Olefins Plc. (TOC) and National Petrochemical Plc. (NPC) under the Public Company Limited Act of 1992 on December 7, 2005. The new company assumed all the assets, liabilities, rights, duties, and responsibilities of the two, and all contractual obligations binding TOC and NPC to PTTCH. PTT secures feedstock for PTTCH’s production processes, namely natural gas and LPG under a 15-year agreement, effective from 1995, renewable for five years. In 1999, the Aromatics (Thailand) Plc. (ATC) transferred to PTT its rights and obligations under a 15-year light naphtha and raffinate supply agreement with PTTCH. PTT concluded another supply agreement with PTTCH for feedstock and natural gas, effective from 1999 for 12 years (renewable for five more years) for the feedstock, and for 20 years (renewable for four more years) for the natural gas. In 2001, PTT signed a 15-year ethane supply agreement with PTTCH, effective from August 1, 2005 (renewable for five more years). PTT amended its supply agreement for ethane, propane, and LPG with PTTCH, effective from July 1, 2003 until the end of 2016, with five-year renewal at a time. Under the amendment, the price of ethane feedstock varies with that of HDPE (film grade) in Southeast Asian markets, which reflects the state of the petrochemical market value chain to the HDPE produced by PTTCH, starting in 2004. As for propane and LPG feedstock prices, an amendment was made to let their prices vary with that of PP (film grade), from January 1, 2003 to December 31, 2016. In 2004, PTT concluded an LPG
048
PTT Public Company Limited
and NGL supply agreement with PTTCH, whereby PTT would supply an additional 13,000 tons/month of LPG and 380,000-470,000 tons/year of NGL as feedstock for the olefins capacity expansion project managed by PTTCH, which was due to complete the upgrading in 2007. Also, in 2006, PTT entered into a 15-year ethane feedstock supply agreement with a subsidiary of PTTCH, effective from its start-up date - projected for the third quarter of 2009 - whereby the price of ethane varies with that of HDPE (film grade) in Southeast Asian markets.
Transactions and agreement with the Aromatics (Thailand) Public Company Limited (ATC) PTT supplies condensate for ATC’s production processes under a 15-year agreement, effective from 1998. PTT concluded long-term supply agreements for all the core products of ATC, which directly supplies such products to customers. These agreements are Take-or-Pay, whereby PTT guarantees minimum sales volumes for products and obtains marketing fees from ATC. The Take-and-Pay agreement was also concluded by PTT to guarantee the product volumes taken, but not to guarantee distribution for the surplus volumes beyond Take-or-Pay. PTT has another product distribution agreement with ATC, namely for condensate residue, light naphtha, and LPG, whereby ATC would directly supply these products to PTT’s customers. For the first two products, the agreement covered 15 years, and for LPG, 10 years, effective from 1997. PTT also signed a natural gas supply agreement with ATC for use in fueling its processes for a period of 11 years, effective from 2005 to 2015.
Transactions and agreement with HMC Polymers Co., Ltd. (HMC) PTT concluded a feedstock supply agreement with HMC. A long-term propane feedstock supply agreement spans 15 years from 2009, with five-year renewal at a time, under which the price of propane varies with that of PP (film grade) in Southeast Asian markets.
Policy on future connected transactions These will be conducted as part of the normal course of business with no special favors and no transfers of benefits between PTT, its subsidiaries, related associated companies, or shareholders. Pricing will continue to be on an arm’s length basis, and the prices of products supplied by PTT’s subsidiaries will be market-based. Disclosure of connected transactions will follow the announcement of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET), and the accounting standard on disclosure of information on related parties or businesses, announced by the Federation of Accounting Profession.
PTT Public Company Limited
049
Management Discussion and Analysis of Financial Status and Performance 050
PTT Public Company Limited
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL STATUS AND PERFORMANCE In the year 2006, global economy expanded 5%, increased from the year 2005 of 4.5%, dominated by Asian, economy, especially China and India, and the recent improvement of Europe, Middle East and Africa (EMEA) economy, despite the fluctuation of oil price, consumer products, financial markets and capital markets. For Thailand, overall economic conditions for the year 2006 improved slightly from the year 2005 due mainly to the high export growth and the deceleration of the import. On the supply and demand side, the production and private consumption decelerated when compared to last year due mainly to the adverse impacts of the high oil prices. However, LPG consumption substantially increased especially in transportation sector due to the government’s support in LPG price. PTT and its subsidiaries’ revenue in 2006 was Baht 1,213,985 million, increased by Baht 287,716 million when compared to the year 2005, or 31.1%. Earning before interest, tax, depreciation and amortization (EBITDA) was Baht 142,675 million, increased by Baht 28,631 million or 25.1%. Share of net income from investments under the equity method was Baht 19,139 million, decreased by Baht 2,512 million or 11.6%. As a result, PTT and its subsidiaries’ net profit was Baht 95,261 million, increased by Baht 9,739 million or 11.4% resulted mainly from gain on disposal of Rayong Refinery Public Co., Ltd. (RRC)’s shares of Baht 6,682 million (after tax) and foreign exchange of Baht 9,925 million while there was gain from debt restructuring of RRC in an amount of Baht 5,417 million and foreign exchange of Baht 0.68 million in 2005. The details of PTT and its subsidiaries’ financial performance by business unit are as follows: (For more details, please refer to the financial statement and Form 56-1)
Oil Business Group Sales revenue in 2006 increased by Baht 190,180 million or 23.6% due to both sales prices and sales volume. Sales volume increased by 3,919 million liters or 7.3% from 53,349 million liters or equivalent to 919,348 barrels per day in 2005 to 57,268 million liters or equivalent to 986,883 barrels per day in 2006, resulted from the increase in both domestic sales and trading segment, mainly from crude, condensate, aviation gasoline, gasohol, naphtha and high-speed diesel. Average sales price in 2006 also increased in relation to the increase of global oil prices. EBITDA in 2006 decreased by Baht 2,249 million from Baht 7,253 million in 2005 to Baht 5,003 million, or 31.0%, due primarily to the decrease in gross margin per unit of domestic sales while selling and administrative expenses increased by Baht 3,713 million or 35.5%, resulted partly from Baht 1,148 million of provision and expenses for excise taxes and for refunds from the Oil Stabilization Fund Receivable from 1997 to 2003 with a low possibility to obtain refunds, Baht 206 million provision for loss on lawsuits regarding a dispute over the construction of the Lam-Loog-Ka and the Saraburi Oil Terminals.
Exploration & Production and Gas Business Group Sales revenue in 2006 increased by Baht 35,754 million or 17.1% due to the natural gas sales (including natural gasoline derived from Dew Point Control Unit) increased by 88 MMcf/d or 2.9% from 2,996 MMcf/d to 3,084 MMcf/d (calculated at heat value 1,000 Btu per cubic feet) which resulted from the increase in gas demand from all customers except Small Power Plants (SPPs). The GSPs’ products sales volume increased from 3,461,911 tons in 2005 to 3,668,045 tons in 2006 or 6.0%. The increase in sales volume mainly resulted from the increase in production of the GSP Unit 5 (GSP5). The average utilization rate of GSP5 in 2006 was 83% compared to 2005 of 63%. The average LPG price (Contract Price - CP) in 2006 increased by US$ 80 per ton from US$ 432 per ton in 2005 to US$ 512 per ton in 2006 while 2006 average prices of ethylene, propylene, High Density Polyethylene (HDPE) and Polypropylene (PP) in the Southeast Asia spot market including Naphtha in the spot market of Singapore (MOP’s) also increased when compared to 2005 due to the increase in oil price which resulted to the higher selling price of Ethane, Propane and NGL.
PTT Public Company Limited
051
The details of all products sales from gas separation plants are as follows: Unit : Tons
2006
LPG
2005
1,968,666
Changes
% Changes
1,933,108
+35,558
+1.8
Ethane
979,763
831,893
+147,870
+17.8
Propane
239,127
221,062
+18,065
+8.2
NGL
480,489
475,848
+4,641
+1.0
Total
3,668,045
3,461,911
+206,134
+6.0
The details of reference products prices for calculation of products from gas separation plants’ sales prices are as follows: Unit : US$ / Ton
2006
LPG1/ Ethylene
2/
Propylene
2/
High Density Polyethylene
2/
Polyethylene2/ Naphtha3/ Notes:
1/
2005
Changes
% Changes
512
432
+80
+18.6
1,157
920
+237
+25.7
1,127
948
+179
+18.9
1,234
1,035
+199
+19.3
1,228
1,061
+167
+16.1
515
424
+90
+21.2
Contract price (CP): The government capped the ex-refinery LPG price for domestic sales at US$ 315 per ton, derived from the CP of US$ 331 per ton, effective from February 10, 2003 onward.
2/
Southeast Asia Spot Price
3/
MOP Singapore
EBITDA of the Exploration & Production and Gas Business Group in 2006 increased by Baht 2,696 million or 6.4% due to the increase in sales prices and sales volume of both natural gas and GSPs’ products as mentioned. However, there was discount on the price of natural gas sold to EGAT in order to reduce the impact from the Fuel Adjustment Charge (at the given time) (Ft) in an amount of Baht 1,323 million in 2006.
Exploration and Production Business (Subsidiary: PTT Exploration and Production Public Co., Ltd. (PTTEP) PTTEP’s sales revenue in 2006 was Baht 76,419 million, increased by Baht 17,046 million or 28.7% from the same period of last year, resulted from the higher average petroleum sales price from US$ 29.37 per BOE in 2005 to US$ 36.52 per BOE in 2006 or 24.3%. In addition, sales volume also increased from 153,531 barrels of oil equivalent per day (BOED) in 2005 to 169,348 BOED in 2006, due mainly to the crude oil sales from the B8/32 & 9A and S1 projects and the natural gas sales volume from Pailin, Bongkot and Yadana projects. However, the sales volume of the Yetakun project has been decreased. EBITDA in 2006 was 63,313 million, increased by Baht 13,262 million or 26.5% due to the increase in sales prices and sales volume as mentioned.
052
PTT Public Company Limited
Refining Business (Subsidiary: Rayong Refinery Public Co., Ltd. (RRC) Sales revenue from the refining subsidiary in 2006 decreased by Baht 64,886 million from 2005 or 45.9% due to the transform of RRC from a subsidiary to an associate since June 5, 2006. EBITDA in 2006 decreased by Baht 6,736 million or 51.0% from Baht 13,205 million in 2005 to Baht 6,469 million in 2006, also due to the transform of RRC from a subsidiary to an associate.
Petrochemical Business (Subsidiaries which comprise of Bangkok Polyethylene Public Co., Ltd. (BPE), PTT Polyethylene Public Co., Ltd. (PTTPE), PTT Phenol Co., Ltd. (PPCL), PTT Chemical Public Co., Ltd. (PTTCH), PTT Polymer Marketing Co., Ltd. (PTTPM), PTT Asahi Chemical Co., Ltd. (PTTAC), HMC Polymer Co., Ltd. (HMC) and PTT Polymer Logistics Co., Ltd. (PTTPL) Sales revenue in 2006 from petrochemical subsidiaries increased by Baht 61,153 million from Baht 15,523 million in 2005 to Baht 76,676 million in 2006, or 394%, due primarily to the consolidated of PTTCH as its status from an associate to a subsidiary since December 2005 and the proportionate consolidation of HMC from share purchase since August 2006. EBITDA in 2006 increased by Baht 22,594 million from Baht 1,740 million in 2005 to Baht 24,334 million, an increase of 1,299% in 2006, also due primarily to the consolidated of PTTCH as its status from an associate to a subsidiary since December 2005 and the proportionate consolidation of HMC from share purchase.
Net Income: Net income in 2006 increased from 2005 by Baht 9,739 million or 11.4% Net income of PTT and it’s subsidiaries in 2006 was Baht 95,261 million or Baht 34.02 per share, increased from 2005 by Baht 9,739 million or 11.4%, due mainly to the followings: : The increase in sales prices and sales volume from gas and oil products. : In 2006 there was gain on disposal of investment from RRC’s IPO in an amount of Baht 6,682 million (after tax) while there was gain from debt restructuring of RRC in an amount of Baht 5,417 million in 2005. : Share of net income from investments under equity method in 2006 decreased by Baht 2,512 million from 2005 (including Baht 3,827 million share of gain on foreign exchange in 2006 while Baht 1,074 million share of loss on foreign exchange) in 2005 due mainly to the followings: - Slightly increase in share of net income from refining associates in 2006 due to the changing of RRC status from PTT’s subsidiary to PTT’s associate, despite the lower performance of refining associates due to the lower Gross Refining Margin (GRM) when compared to 2005 and scheduled plant shut down of Thai Oil Public Co., Ltd. (TOP). GRM of PTT’s complex refineries (included inventory gain/loss) decreased from approximate US$ 7.59/bbl in 2005 to US$ 5.93/bbl in 2006. - Decrease in share of net income from petrochemical associates when compared to 2006 due mainly to the changing of status of PTTCH from PTT’s associate to PTT’s subsidiary despite the recognition of an investment in IRPC Public Co., Ltd. (IRPC) under the equity method and better performance of Aromatic (Thailand) Public Co., Ltd. (ATC).
The Analysis of PTT and its subsidiariesû consolidated Financial Status at the end of the year 2006 compared to the end of the year 2005 During 2006, there were changes in PTT’s subsidiaries’ status, therefore, balance sheets of PTT and its subsidiaries for the year ended December 31, 2006 included PTTEP, PTTCL, SBECL, RBA, PTTT, PTT NGD, PTTLNG, PPCL, PTTCH, PTTPM, PTTUT, EnCo, PTTICT, PTTPL, TTM (T), TTM (M), DCAP, PTTAC and HMC.
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Financial status of PTT and its subsidiaries at the end of 2006 compared to the end of the year 2005 is as follows: Assets The total assets as of December 31, 2006 were Baht 751,453 million, increased by Baht 101,647 million from 2005 or 15.6%. Current assets increased by Baht 31,416 million due primarily to the increase in cash and cash equivalents of Baht 13,365 million. The rising amount was due mainly from PTTCH capital increase, trade accounts receivable of Baht 26,567 million and materials and supplies of Baht 2,020 million despite the decrease in inventories of Baht 8,384 million and other accounts receivable of Baht 3,701 million. Non-current assets increased by Baht 70,231 million. Higher non-current assets were resulted from several factors. Firstly, there was an increase in investment accounted under the equity method by Baht 33,656 million which was due mainly to the change of RRC’s status from PTT’s subsidiary to an associate, the status changed in BCP from another related company to an associate, and the recognition of an investment in IRPC under equity method. Secondly, there was an increase in property, plant and equipment of Baht 31,754 million which was due to the investment in PTT’s third pipeline project and the investment in the subsidiaries’ properties including PTTEP’s Arthit, Oman 44, S1, and Pailin projects and PTTCH’s debottlenecking project (plant I4-1). Thirdly, there was an increase in intangible assets of Baht 11,068 million from the shares purchasing of HMC and PTTCH. Lastly, other long-term investments also increased by Baht 1,040 million due to HMC’s investment in Rayong Olefins Co., Ltd., investment in debt securities and investment in mutual funds while advance payment for gas purchased decreased by Baht 3,148 million and other non-current assets reduced by Baht 3,306 million. Liabilities Total liabilities as of December 31, 2006 were Baht 397,131 million, increased by Baht 25,757 million or 6.9%. Current liabilities increased by Baht 19,565 million due primarily to the increase in trade accounts payable by Baht 16,674 million. Higher trade accounts payable was due partly to trade accounts payable of RRC and the increase in accrued expenses of Baht 3,815 million. Meanwhile, there was the decrease in bank overdrafts and short-term loans from financial institutions of Baht 1,812 million. Non-current liabilities increased by Baht 6,193 million. The increase was due mainly to PTTEP’s Provision for decommissioning costs of Baht 3,693 million, deferred tax liabilities of Baht 1,154 million and other non-current liabilities of Baht 628 million. In 2006, PTT and its subsidiaries had proceeds from long term loan and cash received from the issue of debentures in a total amount of Baht 52,749 million which included PTT’s borrowing from a financial institution in an amount of Yen 23,000 million (PTT has also entered into a Participating SWAP (P-SWAP) to convert the Yen principal into US$ principal, amounting US$ 196.94 million), issuing of un-subordinated and unsecured debentures in a total amount of Baht 16,000 million and club loan borrowing of US$ 300 million. During 2006, PTT and its subsidiaries had made repayment of long term loan, debentures and government bonds in a total amount of Baht 27,451 million. Shareholders’ Equity Total shareholders’ equity as of December 31, 2006 were Baht 354,322 million, increased from the end of 2005 by Baht 75,889 million or 27.3%. The increase was due mainly to the unappropriated retained earnings of Baht 55,309 million, resulted from PTT and its subsidiaries’ net profit of Baht 95,261 million adjusted with dividend payment to the shareholders in an amount of Baht 39,898 million and the rest are legal reserve and reserve for self-insurance fund.
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PTT Public Company Limited
In 2006 there was share capital increase from the exercise of warrants under Employee Stock Option Program (ESOP) in August and November causing an increase in issued and paid-up share capital in an amount of Baht 76.8 million (7,679,900 shares) and premium on ordinary shares of Baht 1,329 million. The increase in shareholder’s equity also included an increase in Minority interests in an amount of Baht 18,874 million due mainly to the better performance as mentioned, an increase in surplus on dilution of investments in subsidiaries and associates in an amount of Baht 808 million. Liquidity In 2006, net increase in cash and cash equivalents of PTT and its subsidiaries was Baht 13,365 million, due mainly to net cash provided by operating activities Baht 104,471 million, net cash used in investing activities Baht 77,338 million, net cash used in financing activities Baht 13,186 million, effects of exchange rates on cash and cash equivalents Baht 668 million and currency translation differences Baht 87 million while cash and cash equivalents at the beginning of the period was Baht 73,441 million. As a result, cash and cash equivalents at the end of the period was Baht 86,806 million.
Future Project PTT’s future projects will mainly focus on large-scale investments in the gas business to create a value added to business and also to sustain the demand growth of natural gas. Natural gas is basically the main fuel of power generation. The projected growth of demand of natural gas for power generation over the next five years (2007-2011) is 5.6% annually. Therefore PTT has planned to secure the gas procurement both domestic and international fields, including the investment in the gas pipeline network to sustain the need of customer and to follow the Third Gas Pipeline Master Plan. The Master Plan included 11 projects of pipeline network for both offshore and onshore such as the Third Gas Pipeline and Sainoi-North Bangkok-South Bangkok pipeline. These projects will increase the capacity of the pipeline for both offshore and onshore for another 1,900 and 2,300 MMcf/d respectively. The internal rate of return on equity (IRROE) for these projects will be 16%. In order to create a value added for the natural gas, to maximize the use of the products, and to support the expansion of petrochemical business from intermediate to downstream, PTT has planned to invest in Ethane cracker and gas separation plant unit 6 for the capacity of 800 MMcf/d, with the IRROE of not less than 15%, in order to produce Ethane and feed as a raw material to PTT Polyethylene Company Limited’s Ethane Cracker project. PTT Polyethylene is the joint investment of PTT and National Petrochemical Public Company Limited (after merged with Thai Olefin Public Company Limited, known as PTT Chemical Public Company Limited) which can produce ethylene at the capacity of 1,000,000 tons per annum. PTT also supports PTT’s petrochemical subsidiaries for the petrochemical downstream expansion. Moreover, PTT promotes the use of Natural Gas for Vehicle (NGV) as it is clean and environmentally friendly. For the factors that could lead to business disruption, please refer to the Risk Factors section.
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RISK FACTORS
As a result of PTT’s continuous risk management efforts, the risk factors disclosed in the past year have been reasonably managed. New risk factors, however, have been identified and managed under the current year’s risk management plan. Therefore, PTT continues to improve this Risk Factors section to better reflect risks associated with petroleum and petroleum-related businesses. Apart from the risk factors related to its business in general, other risk factors need considering are:
1. Strategic Risks 1.1 The Group Management Because PTT has continually expanded its investment through various business groups, the management of PTT affiliates has become more complicated. Without effective and efficient management of all these companies, PTT and its affiliates might have inconsistent strategies and end up competing among themselves, thereby hurting its own overall business performance. As a result, the Company has focused on the management of the organization in a group structure known as the PTT Group, where PTT executives have been appointed presidents or senior executives of PTT affiliates for consistency in policies, strategies, and business directions and closer supervision of business expansion. In addition, executives of PTT and its affiliates took part in drafting a master strategic plan as a guideline for developing business plans for each group.
1.2 Personnel Management System in Support of Business Expansion In response to continued business expansion and the increase in competitive-edge in trading, PTT must adequately prepare its resources, especially its personnel. If human resource management and business expansion are not compatible, PTT’s business performance and competitiveness may decline. Likewise, PTT manages its human resources using a group structure to maximize the sharing of talent and experience, allowing human resource staff to develop plans for personnel training and development. Competency-Based Management and Career Management serve as vital tools for such development.
2. Business Risks 2.1 Gas Sales Agreements and Take-or-Pay Conditions Each gas sales agreement specifies a minimum quantity that PTT is obliged to purchase annually. If PTT cannot take delivery of this minimum quantity, it is required to pay for the volume not taken during that contract year, under the take-or-pay condition. However, PTT is entitled to take the pre-paid gas in subsequent years as make-up gas if it has already paid the minimum contracted amount for the year in question. Problems arising from the take-or-pay requirement or the ability to receive make-up gas might hurt PTT’s financial and operating performance. To efficiently manage its purchase of gas under take-or-pay conditions, PTT ensures that its own sales agreements contain similar conditions. Moreover, it constantly monitors the demand for gas and revises the days on which PTT begins receiving contracted gas to be produced in the future. This is to ensure that the supply of gas corresponds with the customers’ ability to receive gas and the construction completion date for gas transmission pipelines.
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PTT Public Company Limited
2.2 Fee Changes for Gas Supply Procurement, Distribution, and Throughput Tariffs Pipeline throughput tariffs and fees for the procurement and distribution of natural gas were approved by the National Energy Policy Council (NEPC). The current tariffs are in effect from 2001 to 2005 and are subject to revision when PTT has completed its network expansion under the Third Gas Pipeline Master Plan, 2001-2011, as approved by the Cabinet. New tariffs may prove higher because such expansion covers a greater area and involves a longer distance of transmission pipelines, and because pipes and construction machinery are more costly. At any rate, the rate adjustments proposed by PTT are subject to approval by the authority. Depending on economic and social conditions, the government may change the formulas for the tariffs, which could impact PTT’s business growth, financial standing, and operating performance. To ensure suitable tariffs, PTT constantly monitors energy situations and gas consumption and continually revises plans for the expansion of its gas pipeline networks in line with the master plan for gas transmission so that the demand for gas may be efficiently met. On December 23, 2004, NEPC approved the revision of PTT’s Third Gas Pipeline Master Plan, 2001-2011, as the framework for construction of future gas pipeline systems.
2.3 Product Price Fluctuation The sales prices for the products of PTT and its affiliates in domestic and foreign markets reflect those in the international market. Such prices of natural gas, condensate, crude oil, refined petroleum products, and petrochemicals have recently proved highly volatile because of factors beyond the Company’s control, thereby affecting PTT’s business, financial standing, planning, investment, and operating performance. To alleviate this risk, PTT has made long-term agreements with its business partners to establish price and volume targets, as well as risk management periods. All transactions involving derivatives are consistent with PTT’s physical quantity of oil to lock in a definite margin. PTT also closely monitors the world oil market, constantly updates its risk management tools, and regularly provides training for domestic and foreign trading personnel.
2.4 Government Action Creating Potential Conflicts of Interest with Others Shareholders PTT’s retention of its state-enterprise status, with the Ministry of Finance serving as the major shareholder, sometimes works against PTT’s business objectives. The government has previously used and can use PTT as its tool to achieve national social or economic objectives. As long as this status remains, PTT cannot guarantee that it would not follow the government policies and do the businesses for the most benefit of PTT or for other objectives.
2.5 Transfer of Former Power, Rights, Privileges, and Benefits of PTT Plc. (Provided under PTT Act and State Enterprise Corporatization Act) to the PTT Plc. Authority Regulation Board With the publication of a decree on the power, rights, and benefits of PTT Plc., (No. 2), B.E. 2550, in the Royal Gazette on February 16, 2007, with effect from March 18, 2007, below are the essences of this decree: 1. Revoke the power, rights, privileges, and benefits formerly provided to PTT Plc., namely the rights and benefits as a virtual concessionaire under the laws relating to petroleum (Section 8, Petroleum Authority of Thailand Act, B.E. 2521 [1978]); the privileges of PTT Plc. properties not subject to liability under execution (Section 5, Royal Decree on the Power, Rights, Privileges, and Benefits, B.E. 2544 [2001]); and the power to expropriate properties under the law on real-estate expropriation (Section 38, Petroleum Authority of Thailand Act, B.E. 2521 [1978]).
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2. Transfer the power, rights, privileges, and benefits of PTT Plc. under the Petroleum Authority of Thailand Act, B.E. 2521 [1978]), including the survey and designation of petroleum transmission pipeline zones, and pipeline laying under, over, or through individuals’ properties, to the PTT Plc. Authority Regulation Board, who will announce stipulated criteria and terms and conditions for implementation in the Royal Gazette. 3. The PTT Plc. Authority Regulation Board is chaired by the permanent secretary of energy along with a representative of the Ministry of Interior, a representative of the Council of State, up to three experts appointed by the minister of energy as members, and the director-general of the Energy Policy and Planning Office serving as secretary to the Board. As for the necessity for issuing this decree, the government cited that PTT now commanded enough business potential and competitiveness with others in the petroleum business.
2.6 Litigation in the Administrative Court about the Transformation and Privatization of the Petroleum Authority of Thailand On August 31, 2006, the Foundation for Consumers and its parties of five (Suer) sued the prime minister, the Cabinet, and the Energy Minister (Suee) in the Supreme Administrative Tribunal, asking it to revoke two royal decrees issued under the State Enterprise Corporatization Act, B.E. 2542 (1999), in the transformation of the Petroleum Authority of Thailand into PTT Public Company Limited (PTT). These consisted of a royal decree on the authority, rights, and benefits of PTT Plc., B.E. 2544 (2001), and a timeline for the revocation of laws concerning the Petroleum Authority of Thailand, B.E. 2544 (2001). While PTT believes that its privatization conformed to the criteria and procedures of relevant laws, it has no way of knowing explicitly the results from the revocation if the tribunal would order the revocation of any or both decrees, or if the ruling would be retroactive, or if the ruling will significantly harm PTT’s status. If PTT should revert to a state enterprise as a result of the two decrees being revoked, contractual obligations under the Company’s debentures and the holders may merely change to a different issuer, that is, the Petroleum Authority of Thailand, comparing this with the memorandum of the Council of State on completed case number 208/2549 (enforcement of the Supreme Administration Tribunal’s ruling: the revocation of a royal decree on the transformation of the Electricity Generation Authority of Thailand into EGAT Plc.).
2.7 Use of Water in Petrochemical Plants, Refineries, and Gas Separation Plants Most of these PTT Group plants are located in Map Ta Phut Industrial Estate, Rayong. In their processes they need a large volume of water from natural bodies of water for their cooling. If the area runs short in water supply to feed the industrial sector, some plants could be suspended or have their output reduced - thereby directly lowering PTT’s revenue. The PTT Group has defined alleviating measures. In the short term, it has secured nearby water sources, prepared desalination processes from sea water, and prepared transportation of fresh water by barge and truck from other bodies of water. Long-term measures included acquisition of reserve water supplies, investigation of the economic feasibility of a reverse osmosis / desalination system, and investigation of air cooling or seawater cooling to replace conventional cooling systems for new projects. Besides, PTT has monitored the drought situation while closely coordinating with the public sector to ensure its own ability to manage the potential impact.
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PTT Public Company Limited
3. Project Execution Risks 3.1 Development of Gas Transmission System, Gas Separation Plants, and Petrochemical Plants The key factors for the Company’s successful business expansion include a continuous increase in natural gas consumption, the ability to expand its gas transmission system and create value, a greater reach of its gas transmission system to customers, its gas separation capacity, and the success in building petrochemical plants under the PTT Group, which rely on natural gas for their processes. Projects may experience delays for various reasons, including delays in identifying construction contractors, procurement of long-lead items, getting approval from the government, and the preparation of environmental impact assessment (EIA) reports. Delays in project completion could hurt PTT’s financial and operating performance. Therefore, PTT pays close attention to Critical-Path management, that is, tackling the tasks most critical to each project’s timing and success. These include acceleration of the hiring of construction contractors; close monitoring of the procurement of construction materials; development of measures to reduce environmental impacts; monitoring and analysis of impacts on project management; appointment of a community relations task group to develop plans for public participation; and preparation of plans and measures to minimize the potential impact of project delays.
4. Operation Risks 4.1 Commercial Risks from Operations Many hazards are inherent to the exploration, production, and transportation of natural gas, crude oil, petrochemicals, and refined petroleum products, including fires, explosions, oil spills, well blowouts, gas pipeline leaks, dispersion of hazardous gases, terrorist activities, natural disasters, actions of external parties, and other unforeseen events. These hazards could prove detrimental to PTT’s personnel, assets, environment, business operations, reputation, financial standing, and business opportunities. PTT takes risk management seriously by adopting Preventive Maintenance measures for its production facilities and instituting emergency and crisis response preparedness measures. Like other companies in the petroleum and petrochemical industries, PTT has taken out insurance to protect its major operating assets against risks as well as business interruption.
4.2 Environmental and Safety Regulations All our business operations must comply with the laws and regulations concerning the impact on the environment and safety. Currently, domestic laws and regulations are more lenient than those in industrialized countries. However, future changes, including changes to the enforcement of such laws and regulations, may limit PTT’s operations or significantly raise operating costs. Besides, community acceptance or rejection of any operations could harm PTT’s future business and ability to generate revenue. To address these risks, PTT monitors and analyzes the impact of changes in environmental and safety laws and regulations on its operations. PTT also closely coordinates with government agencies, uses available information to develop work plans and response measures, and ensures ongoing community relations activities in operating areas.
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5. Financial Risks 5.1 Fluctuation of the Baht Since PTT and its affiliates have outstanding foreign loans, changes in the exchange rate between the baht and the US dollar have both direct and indirect effects on the majority of PTT’s revenue, consequently affecting PTT’s bottom line. Therefore, the fluctuation of the baht and the government’s economic policies affect PTT’s consolidated financial and operating performance. To alleviate this, PTT has balanced its foreign loans in proportion to its revenue from foreign currencies (Natural Hedge) while managing its Foreign Currency Deposits and purchasing foreign currency forward to match the quantity of foreign currency required for loan repayment and for imported natural gas and crude oil. PTT has developed a Treasury and Credit Policy for use as a common guideline for PTT and all other companies in the Group, incorporating the requirement to institute risk management to handle risks to PTT’s financial standing.
5.2 Financial Support to Affiliated Companies In the past and during the recent Asian economic crisis, PTT provided financial support to its affiliates under a shareholder support agreement, and coordinated with the executives, creditors, and other major shareholders of these affiliates on debt restructuring. Despite the improved performance of most affiliates since 2003, PTT cannot ensure that these companies would be able to repay their loans to PTT; that they would not reencounter any more financial problems; or that they would not need PTT’s financial support in the future. In any cases, the financial conditions of PTT affiliates could impact PTT’s financial and operating performance. To address this, PTT has played a leading role in promoting debt restructuring among its affiliates and has issued a policy to refrain from incurring new obligations unless they are necessary and beneficial to PTT’s long-term success. In such cases, the Company will consider providing short-term loans or commercial loans, or both, and believes that this policy will strengthen the financial conditions of companies in PTT Group.
5.3 Acquisition of Funds for Plan Execution The businesses of PTT - in particular, petroleum exploration and production, natural gas transmission, and the petrochemical business - require massive capital investments. Although PTT closely monitors and manages risks, the actual investment capital required may deviate from project plans due to factors beyond its control. This could affect the success and capital costs of PTT projects. As a rule, PTT adheres to a 1 : 1 debt-to-equity ratio and a net debt-to-EBITDA ratio of up to 2 : 1 when securing investment capital, and continuously monitors changes in factors that affect the sourcing of investment capital. Therefore, PTT believes it can secure sufficient and suitable funds for future business expansion.
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ORGANIZATION CHART Auditors
Shareholder
Board of Directors
Audit Committee
Nomination Committee
Corporate Governance Committee
Remuneration Committee
President Managed through 11 committees
EVP, PTT Research and Technology Institute
EVP, Office of Corporate Audit
EVP, International Trading VP, Corporate Public Relations Department
SEVP, Corporate Strategy & Development 1. EVP, Corporate
SEVP, Corporate Finance & Accounting 1. EVP, Corporate Finance
Strategy & Planning
VP, Office of the President
SEVP, Corporate Support
SEVP, Exploration & Production and Gas Business Group
1. EVP, Corporate
1. EVP, Strategic
Human Resources
SEVP, Oil Business Group 1. EVP, Planning
2. EVP, Corporate Accounting
Business
2. EVP, Office of Corporate Legal
2. EVP, Project
2. EVP, Business 3. EVP, Commercial
3. EVP, Natural Gas Supply & Trading 4. EVP, Natural Gas
Development
& International
& Project
Marketing
Management
4. EVP, Supply
Transmission
& Logistics
5. EVP, Natural Gas
5. EVP, Terminal
Processing
& Management
Marketing
Management
Development
1. EVP, Subsidiary Planning
Planning 2. EVP, Retail
2. EVP, Corporate
SEVP, Petrochemicals & Refining Business Group
Operations
6. EVP, Natural Gas Vehicle
*
SEVP
= Senior Executive Vice President
** EVP
= Executive Vice President
*** VP
= Vice President
PTT Public Company Limited
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PTT BOARD OF DIRECTORS
Mr. Cherdpong Siriwit
Age 61
Chairman
Dr. Pornchai Rujiprapa Director
(%) Share Holding
None
(%) Share Holding
Education / Training
Education / Training
• • •
• •
B.A. (Hons.) (Economics), Thammasat University M.A. (Economics), Georgetown University, U.S.A. The National Defence Cource, The National Defence College (Class 40)
•
Politics and Governance in Democratic System for Executive Course, King Prajadhipoks Institutes (Class 5)
•
M.P.A. (Programming Planning Administration) National Institute of Development Administration (NIDA)
• • •
Thai Institute of Directors Association (IOD) 2004 : DAP / RCM / FN
M.Sc. (Regional Economics), University of Pennsylvania, U.S.A. Ph.D. (Regional Economics), University of Pennsylvania, U.S.A. The Joint State-Private Course, The National Defence College (Class 11)
Work Experience 2002 - 2005
Work Experience
: Permanent Secretary, Ministry of Energy
Positions in Other Core Affiliated Companies Chairman of the Board, PTT Exploration and Production
062
: Deputy Permanent Secretary, Ministry of Energy
2006 - Present : Member of the National Legislative Assembly, Thailand : Permanent Secretary, Ministry of Energy
Chairman of the Board, Thai Oil Public Company Limited
Positions in Other Core Affiliated Companies
Chairman of the Board, PTT Chemical Public Company Limited
• • •
Chairman of the Board, Ratchaburi Electricity Generating Holding Public Company Limited
• •
Thai Institute of Directors Association (IOD) 2006 : DAP
2003
Public Company Limited
• • •
Chairman of the Board, Rayong Refinery Public Company Limited Chairman of the Board, Thai Oil Power Company Limited
PTT Public Company Limited
None
B.Sc. (Agro-Industry), Kasetsart University
•
•
Age 55
Chairman of the Board, Electricity Generating Authority of Thailand Chairman of the Board, Electricity Generating Public Company Limited Director of the Board, PTT Chemical Public Company Limited
Mr. Metta Banturngsuk
Age 56
Director
Mrs. Puntip Surathin Director and Nominating Committee Member
(%) Share Holding
None
(%) Share Holding
Education / Training
Education / Training
• • •
• •
B.A. (Accounting), Chulalongkorn University LL.B., Ramkhamhaeng University The National Defence Course, The National Defence College
B.A. (Accountancy) (Hons.), Chulalongkorn University M.A. (Business Administration), Fort Hays Kansas State College,
The National Defence Course, The National Defence College (Class 40)
Thai Institute of Directors Association (IOD) 2006 : DAP / DCP
Work Experience
•
2002 - 2006
Work Experience
: Director General, Energy Policy and Planning Office, Ministry of Energy
Thai Institute of Directors Association (IOD) 2001 : DCP
2002
: Director General, State Enterprise Policy Office,
2005
: Deputy Permanent Secretary, Ministry of Finance
Ministry of Finance
2006 - Present : Director General, Department of Energy Business, Ministry of Energy Positions in Other Core Affiliated Companies
None
0.000357
U.S.A.
•
(Class 46)
•
Age 59
2006 - Present : Director General, The Treasury Department, Ministry of Finance Positions in Other Core Affiliated Companies
None
PTT Public Company Limited
063
Mrs. Pannee Sathavarodom
Age 59
Director and Remuneration Committee Member
(%) Share Holding
Gen. Apichart Penkitti Independent Director
0.000143
(%) Share Holding
Education / Training
Education / Training
• • •
•
B.A. (Hons.) (Economics), Thammasat University
The National Defence Course, The National Defence College
Advances Executive Program, 2004, Kellogg School of Management, Northwestern University
•
•
Work Experience 2001 - 2002
: Deputy Director-General, Fiscal Policy Office and Director-General, Public Debt Management Office, Ministry of Finance
2002 - 2006
: Director-General, Public Debt Management Office, Ministry of Finance
2006 - Present : Director-General, Fiscal Policy Office, Ministry of Finance Positions in Other Core Affiliated Companies
064
Master of Science in Mechanical Engineering,
•
The National Defence Course, The National Defence College (Class 43)
Work Experience 2002
: Deputy Commanding General,
2003
: Director-General, Office of Policy and Planning,
Thai Institute of Directors Association (IOD) 2005 - 2006 : DAP / FN / Fostering a Board and Management Team
•
Bachelor of Science, Chulachomklao Royal Military Academy
US. Naval Post Graduate School Monterey, California, U.S.A.
Bond Markets : Fixed Income Analysis, Economic Development Institute of the World Bank (1996)
•
0.000357
Class 19
M.A. (Economics), Thammasat University
(Class 44)
•
Age 58
Director of the Board, Rayong Refinery Public Company Limited
PTT Public Company Limited
Armed Forced Development Command
Ministry of Defence 2005 - Present : Deputy Permanent Secretary for Defence Positions in Other Core Affiliated Companies
None
M.L. Panasarn Hasdin
Age 62
Independent Director
(%) Share Holding
Dr. Olarn Chaipravat Independent Director and Chairman of the Audit Committee
None
(%) Share Holding
Education / Training
Education / Training
• • •
•
Bachelor of Architecture (Hons.), Chulalongkorn University
The National Defence Cource, The National Defence College
•
Thai Institute of Directors Association (IOD) 2006 : Developing CG / Setting the CEO Performance Plan & Evaluation / UFS
Ph.D. (Economics), Massachusetts Institute of Technology (M.I.T.),
Present
: Honorary Advisor to Fiscal Policy Research Institute (FPRI)
: Deputy Secretary-General to the Prime Minister for Administration Affairs : Deputy Permanent Secretary to the Prime Minister
Positions in Other Core Affiliated Companies
Thai Institute of Directors Association (IOD) 2003 : DAP
Work Experience
Work Experience
2003 - 2005
B.S. (Magna Cum Laude) (Economics), Wharton School,
U.S.A.
•
The Psychological Operation Staff Course 33
1997 - 2003
None
University of Pennsylvania, U.S.A.
Master of Architecture, University of Pennsylvania, U.S.A.
(Class 37)
• •
Age 63
Positions in Other Core Affiliated Companies
• •
Director of the Board, Thai Oil Public Company Limited Director of the Board, PTT Chemical Public Company Limited
None
PTT Public Company Limited
065
Dr. Suchart Thada-Thamrongvech
Age 55
Independent Director, Audit Committee Member,
Mr. Chakramon Phasukavanich
Age 59
Independent Director and Chairman of the Nominating Committee
and Chairman of the Corporate Governance Committee (%) Share Holding
None
(%) Share Holding
Education / Training
Education / Training
• •
• • • •
B.A. (Hons.) (Economics), Thammasat University M.Sc. (Economics), The London School of Economics and Political Science, UK
• •
Ph.D. (Economics), McMaster University, Canada
•
•
Thai Institute of Directors Association (IOD) 2001 - 2006 : DCP / DAP / FN / ACP / Fostering a Board and Management Team
B.A. (Economics), Chulalongkorn University M.A. (Economics), California State University in Northridge, U.S.A. Certificate of Senior Executive Development Program (Class 12) The National Defence Course, The National Defence College (Class 39)
The Joint State-Private Course, The National Defence College (Class 1)
0.000357
Thai Institute of Directors Association (IOD) 2004 : DAP / FN / ACP/ DCP
Work Experience
Work Experience
2001 - 2002
: Secretary General, Board of Investment
2003 - 2005
: Policy Advisor to the Minister of Energy
2002 - 2004
: Secretary General, National Economic and Social
2003 - 2006
: Director of the Board, Rice Policy Committee
2004 - 2006
2004 - Present : Permanent Secretary, Ministry of Industry
: Eminent Advisor to the Prime Minister in the Field
2006 - Present : Member of the National Legislative Assembly, Thailand
of Economics 2005 - 2006
: Director of the Board, Securities and Exchange Commission Thailand
1995 - Present : Associate Professor of Economics, Faculty of Economics, Ramkhamhaeng University Positions in Other Core Affiliated Companies
• •
Director of the Board, Petroleum Committee Director of the Board and Chairman of the Audit Committee, Ratchaburi Electricity Generating Holding Public Company Limited
•
066
Development Board
: Advisor to the Board of Investment
Director of the Board, Rayong Refinery Public Company Limited
PTT Public Company Limited
Positions in Other Core Affiliated Companies
•
Director of the Board, Thai Oil Public Company Limited
Dr. Ampon Kittiampon
Age 52
Independent Director, Nominating Committee Member,
Dr. Phadhadej Dhamcharee
Age 56
Independent Director and Audit Committee Member
and Chairman of the Remuneration Committee (%) Share Holding
None
(%) Share Holding
Education / Training
Education / Training
• • •
• • • •
B.A., Kasetsart University M.S. (Economics), Northeastern University Boston, U.S.A. Ph.D. (Applied Economics), Clemson University, South Carolina, U.S.A.
• •
B.A. (Economics), Yale University, U.S.A. M.A. (Economics), Yale University, U.S.A. Ph.D. (Political Economy), Amsterdam University, the Netherlands Thai Institute of Directors Association (IOD) 2005 - 2006 :
CIO 3
DCP / FN / ACP/ Fostering a Board and Management Team /
The National Defence Cource, The National Defence College
Developing CG / Director Forum
(Class 45)
•
None
Work Experience
Thai Institute of Directors Association (IOD) 2006 : DCP
Work Experience 2002 - 2004
: Deputy Permanent Secretary of the Ministry of Agriculture and Cooperatives
2003
2006 - Present : Farmer, Dairy Farm / Cash Crop in Phetchabun Province Positions in Other Core Affiliated Companies
•
Director of the Board, Rayong Refinery Public Company Limited
: Director of the National Bureau of Agriculture Commodity and Food Standards (ACFS)
2004 - Present : Secretary General of the Office of National Economic and Social Development Board 2006 - Present : Member of the National Legislative Assembly, Thailand Positions in Other Core Affiliated Companies
•
Director of the Board, Rayong Refinery Public Company Limited
PTT Public Company Limited
067
Gen. Somdhat Attanand
Age 63
Independent Director and Corporate Governance Committee Member
Dr. Pisanu Sunthraraks
Age 53
Independent Director, Remuneration Committee Member, and Corporate Governance Committee Member
(%) Share Holding
None
(%) Share Holding
Education / Training
Education / Training
•
• • • • •
Bachelor of Science, Chulachomklao Royal Military Academy Class 14
•
The Joint State-Private Course, The National Defence College (Class 10)
•
Thai Institute of Directors Association (IOD) 2006 : DAP / FN / ACP
: Commander-in-Chief of the Royal Thai Armed Forced, Ministry of Defence
2002
Headquarters, Ministry of Defence
PTT Public Company Limited
M.A. (Ibero - American Studies), University of Wisconsin, U.S.A. Ph.D. (Political Science), University of Wisconsin, U.S.A. Thai Institute of Director Association (IOD) 2004 :
Work Experience : Deputy Director Institute of East Asian Studies, Thammasat University : Assistant Professor, Faculty of Political Science,
2006 - Present : Member of the National Legislative Assembly, Thailand
068
M.A. (Political Science), University of Wisconsin, U.S.A.
Present
: Supreme Commander, the Supreme Command
Positions in Other Core Affiliated Companies
B.A. (History & Political Science), University of Kansas, U.S.A.
DAP / Developing CG
Work Experience 2001
None
None
Thammasat University Positions in Other Core Affiliated Companies
None
Mr. Prasert Bunsumpun
Age 55
Director and Secretary
(%) Share Holding
0.011616
Education / Training
• • •
B.Eng. (Civil Engineering), Chulalongkorn University M.B.A., Utah State University, U.S.A. The Joint State-Private Course, The National Defence College (Class 10)
•
Certificate in Advanced Management Program, Harvard Business School, U.S.A.
•
Politics and Governance in Development Systems for Executive Course, King Prajadhipoks Institutes (Class 6)
• •
Thai Institute of Directors (IOD) 2004 : DAP Capital Market Academy Leadership Program, Capital Market Academy (Class 3)
Work Experience 2001 - 2003
: Senior Executive Vice President, Gas Business Group, PTT Public Company Limited
2003 - Present : President, PTT Public Company Limited 2006 - Present : Member of the National Legislative Assembly, Thailand Positions in Other Core Affiliated Companies
•
Director of the Board, PTT Exploration and Production Public Company Limited
• • • •
Director of the Board, Thai Oil Public Company Limited Director of the Board, PTT Chemical Public Company Limited Director of the Board, Rayong Refinery Public Company Limited Director of the Board, IRPC Public Company Limited
PTT Public Company Limited
069
PTT EXECUTIVES
Mr. Prasert Bunsumpun
Age 55
Mr. Anon Sirisaengtaksin
Age 55
Senior Executive Vice President,
President
Corporate Strategy & Development (%) Share Holding
0.011616
(%) Share Holding
Education / Training
Education / Training
• • •
• • •
B.Eng. (Civil Engineering), Chulalongkorn University M.B.A., Utah State University, U.S.A. The Joint State-Private Course, The National Defence College (Class 10)
•
Politics and Governance in Development Systems for Executive
•
Capital Market Academy Leadership Program,
PTT Public Company Limited 2006 - Present : Acting Executive Vice President, PTT Research and Technology Institute,
Work Experience : Senior Executive Vice President, Gas Business Group, PTT Public Company Limited 2003 - Present : President, PTT Public Company Limited 2006 - Present : Member of the National Legislative Assembly, Thailand Positions in Other Core Affiliated Companies Director of the Board, PTT Exploration and Production Public Company Limited
• • • •
070
PTT Public Company Limited Positions in Other Core Affiliated Companies
• •
Director of the Board, Rayong Refinery Public Company Limited Director of the Board, IRPC Public Company Limited
PTT Public Company Limited
Director of the Board, Rayong Refinery Public Company Limited Director of the Board, The Aromatics (Thailand) Public Company Limited
• • •
Director of the Board, Thai Oil Public Company Limited Director of the Board, PTT Chemical Public Company Limited
Thai Institute of Directors (IOD) 2006 : DAP / DCP
Corporate Strategy and Development,
Capital Market Academy (Class 3)
•
Certificates in Project Investment Appraisal and Management
2002 - Present : Senior Executive Vice President,
Thai Institute of Directors (IOD) 2004 : DAP
2001 - 2003
M.B.A., Thammasat University
Work Experience
Course, King Prajadhipoks Institutes (Class 6)
• •
B.Sc., Chulalongkorn University
and Global Leadership, Harvard University
Certificate in Advanced Management Program, Harvard Business School, U.S.A.
•
0.003206
Director of the Board, HMC Polymers Company Limited Director of the Board, Star Petroleum Refining Company Limited Director of the Board, Independent Power (Thailand) Company Limited
•
Director of the Board, PTT Natural Gas Distribution Company Limited
Mr. Pichai Chunhavajira
Age 58
Mr. Songwut Chinnawat
Senior Executive Vice President,
Senior Executive Vice President,
Corporate Finance and Accounting
Corporate Support
(%) Share Holding
0.000784
(%) Share Holding
Education / Training
Education / Training
• • •
• •
B.A. (Accounting), Thammasat University Certified Auditor No. 2918 M.B.A. (Business Administration), Indiana University of Pennsylvania,
• • •
Honorary Degree Doctor of Philosophy (Accounting)
B.Eng. (Civil Engineering), Kasetsart University M.Eng. (Civil Engineering), Lamar University, Beaumont,
Certificate in Advanced Management Program, Harvard Business School, U.S.A.
The Joint State-Private Course, The National Defence College (Class 13)
• •
Certificate in Advanced Management Program, Banff School The Joint State-Private Course, The National Defence College (Class 16)
Thai Institute of Directors (IOD) 2005 : DAP
Work Experience
•
2001
Work Experience
: Deputy Governor, Finance, Petroleum Authority of Thailand
•
Distribution Company Limited (PTTNGD)
PTT Public Company Limited
Director of the Board, The Aromatics (Thailand) Public
Positions in Other Core Affiliated Companies
Company Limited
•
Director of the Board, PTT Exploration and Production Public Company Limited
• • • • •
: Director and General Manager, PTT Natural Gas
2003 - Present : Senior Executive Vice President, Corporate Support,
Positions in Other Core Affiliated Companies
•
Thai Institute of Directors (IOD) 2005 : DAP
1998 - 2002
2001 - Present : Senior Executive Vice President, Corporate Finance and Accounting, PTT Public Company Limited
0.001144
Texas, U.S.A.
•
U.S.A.
Age 57
Director of the Board, PTT Natural Gas Distribution Company Limited
•
Director of the Board, Energy Complex Company Limited
Director of the Board, Dhipaya Insurance Public Company Limited Director of the Board, PTT Chemical Public Company Limited Director of the Board, Bangchak Petroleum Public Company Limited Director of the Board, Thai Oil Company Limited Director of the Board, Thai Petroleum Pipeline Company Limited
PTT Public Company Limited
071
Mr. Chaivat Churitti
Age 59
Dr. Chitrapongse Kwangsukstith
Senior Executive Vice President
Senior Executive Vice President
Oil Business Group
Exploration & Production and Gas Business Group
(%) Share Holding
0.002032
(%) Share Holding
Education / Training
Education / Training
•
• • • • •
B.Sc. (Economics), Nathaniel Hawthorne College, U.S.A.
Work Experience 2002 - 2003
: Executive Vice President, Retail Marketing, Oil Business Group
2003 - 2005
: Executive Vice President, Planning, Oil Business Group
• • • •
Director of the Board, Thai Lube Blending Company Limited
B.Eng. (Mechanical Engineering), Chulalongkorn University M.Eng. (Industrial Engineering), Lamar University, Texas, U.S.A. Ph.D. (Industrial Engineering), Lamar University, Texas, U.S.A. Stanford Executive Program, Stanford University, U.S.A. The Joint State-Private Course, The National Defence College
Work Experience 2000 - 2003
: Director and President, PTT Exploration & Production Public Company Limited
Director of the Board, Fuel Pipeline Transportation Company Limited Director of the Board, Retail Business Alliance Company Limited
0.004625
(Class 12)
2005 - Present : Senior Executive Vice President, Oil Business Group Positions in Other Core Affiliated Companies
Age 58
2003 - Present : Senior Executive Vice President, Exploration & Production and Gas Business Group,
Director of the Board, Energy Complex Company Limited
PTT Public Company Limited Positions in Other Core Affiliated Companies
•
Chairman of the Board, PTT Natural Gas Distribution Company Limited
• •
Chairman of the Board, Energy Complex Company Limited Director of the Board, PTT Exploration & Production Public Company Limited
•
Director of the Board, The Aromatics (Thailand) Public Company Limited
•
Director of the Board, District Cooling System & Power Plant Company Limited
• •
072
PTT Public Company Limited
Director of the Board, HMC Polymer Company Limited Director of the Board, Ratchaburi Power Company Limited
Dr. Prajya Phinyawat
Age 56
Mr. Aditheb Bisalbutr
Senior Executive Vice President
President
Petrochemicals and Refining Business Group
PTT Chemical Public Company Limited
(%) Share Holding
0.004777
(%) Share Holding
Education / Training
Education / Training
• • • •
• • • •
B.E. (Civil Engineering), Chulalongkorn University M.S. (Civil Engineering), Stanford University, U.S.A Ph. D. (Civil Engineering), University of Texas at Austin, U.S.A. The Joint State-Private Course, The National Defence College (Class 15)
•
: Senior Executive Vice President, Corporate Support,
M.Eng. (Electrical Engineering), University of Houston, U.S.A. Certificate on Modern Marketing, Chulalongkorn University Thai Institute of Directors Association (IOD) 2005 : DCP
Refining Business Group, PTT Public Company Limited Positions in Other Core Affiliated Companies Director of the Board, Rayong Refinery Public Company Limited Director of the Board, PTT Chemical Public Company Limited Director of the Board, Thai Oil Public Company Limited Director of the Board, The Aromatics (Thailand) Public Company Limited
: President and CEO, Thai Olefins Public Company Limited
2005 - Present : President and CEO,
PTT Public Company Limited 2004 - Present : Senior Executive Vice President, Petrochemicals &
•
B.E. (Electrical Engineering), Chulalongkorn University
1999 - 2005
Work Experience
• • • •
0.004236
Work Experience
Thai Institute of Directors (IOD) 2002 : DCP
2002 - 2003
Age 59
PTT Chemical Public Company Limited Positions in Other Core Affiliated Companies
• • • • • • •
Chairman of the Board, Thai Ethanolamines Company Limited Chairman of the Board, TOC Glycol Company Limited Chairman of the Board, Thai Choline Chloride Company Limited Director of the Board, PTT Chemical Public Company Limited Director of the Board, Thai Oleochemicals Company Director of the Board, Vinythai Public Company Limited Director of the Board, Thai Tank Terminal Limited
Director of the Board, IRPC Public Company Limited
PTT Public Company Limited
073
Dr. Viroj Mavichak
Age 59
Mr. Permsak Shevawattananon
President
President
Thai Oil Public Company Limited
The Aromatics (Thailand) Public Company Limited
(%) Share Holding
0.004417
(%) Share Holding
Education / Training
Education / Training
• • • • •
• •
B.E. (Hons.) (Civil Engineering), Chulalongkorn University M.S.C.E. (Civil Engineering), University of Texas at Austin, U.S.A. Ph.D. (Civil Engineering), University of Texas at Austin, U.S.A. Program for Management Development, Harvard University, U.S.A.
B.Eng. (Mechanical), University of Santo Tomas Manila, Philippines Certificate in Asian Executive Program (AEP) GE Management
Certificate in Senior Executive Program (SEP) Sasin Graduate Institute of Business Administration of Chulalongkorn University
Work Experience
•
1999 - 2004
Work Experience
National Petrochemical Public Company Limited
Present
: President, Thai Oil Public Company Limited
Public Company Limited Positions in Other Core Affiliated Companies
•
Director of the Board, Thai Oil Public Company Limited Director of the Board, Thai Lube Base Public Company Limited Director of the Board, Independent Power (Thailand) Company Limited
• • •
074
Director of the Board, Thai Oil Power Company Limited Director of the Board, Thai Paraxylene Company Limited Director of the Board, Thai Oil Marine Company Limited
PTT Public Company Limited
Director of the Board, The Aromatics (Thailand) Public Company Limited
Positions in Other Core Affiliated Companies
• • •
Thai Institute of Directors Association (IOD) 2004 : DCP
2004 - Present : President, The Aromatics (Thailand)
2001 - Present : Senior Executive Vice President, PTT Public Company Limited
0.002699
Development Institute
•
Thai Institute of Directors Association (IOD) 2003 : DAP / DCP
: President,
Age 57
• •
Director of the Board, PTT Utility Company Limited Director of the Board, PTT Phenol Company Limited
Mr. Maroot Mrigadat
Age 55
President PTT Exploration and Production Public Company Limited (%) Share Holding
None
Education / Training
• • • •
B.S. (Petroleum Engineering), University of Texas at Austin, U.S.A. M.S. (Petroleum Engineering), University of Texas at Austin, U.S.A. Certificate in Advance Management Course from INSEAD, France The Joint State-Private Course, The National Defence College (Class 17)
•
Positions in Other Core Affiliated Companies
•
Director of the Board, PTT Exploration and Production Public Company Limited
• • • •
Chairman of the Board and President, PTTEP International Limited Chairman of the Board and President, PTTEP Services Limited Chairman of the Board and President, PTTEP Siam Limited Chairman of the Board and President, PTTEP (Thailand) Limited
Thai Institute of Directors Association (IOD) : DCP / DAP
Work Experience 2002 - 2003
: Senior Vice President, Business Development, PTT Exploration and Production Public Company Limited
2003 - Present : President, PTT Exploration and Production Public Company Limited
PTT Public Company Limited
075
076
PTT Public Company Limited
Details of¢âÕthe of Directors andâ∫√‘Management of PTT, Subsidiaries, Associates December 2006∏—𫓧¡ ¡Ÿ≈Board °“√¥”√ßμ”·Àπà ߢÕߺŸ À“√ ·≈–ºŸâ¡’Õ”π“®§«∫§ÿ ¡„π ∫¡®. ªμ∑. ∫√‘…—∑¬àand Õ¬ Related ∫√‘…—∑√à«¡Companies ·≈–∫√‘…—∑∑’asˇ°’ofˬ«¢â Õß ≥ «—π31, ∑’Ë 31
2548
SHAREHOLDING AND MANAGEMENT STRUCTURE PTT Plc.ûs Equity Structure Item
Shares (in millions)
Value (million baht)
Registered Capital
2,857
28,572
-
Paid-Up Capital as of December 31, 2006
2,805
28,049
100.00
1,468
14,677
52.33
- Vayupak Fund 1 by MFC Asset Management Plc.
218
2,179
7.77
- Vayupak Fund 1 by Krung Thai Asset Management Plc.
218
2,179
7.77
- Institutional and Public Investors
901
9,014
32.13
52
523
- Ministry of Finance
Unpaid Capital
-
% of Total Shares
Its top 15 shareholders as of January 10, 2007 were as follows: % No.
Name
No. of Shares
of Total Shares
1.
Ministry of Finance
1,467,750,743
52.33
2.
Vayupak Fund 1 by Krung Thai Asset Management Plc.
217,900,000
7.77
3.
Vayupak Fund 1 by MFC Asset Management Plc.
217,900,000
7.77
4.
HSBC (Singapore) Nominee Pte., Ltd.
46,666,730
1.66
5.
Chase Nominees Limited 42
42,711,800
1.52
6.
Thai NVDR Co., Ltd.
39,421,312
1.41
7.
Nortrust Nominees Ltd.
32,815,569
1.17
8.
State Street Bank and Trust Company
31,543,684
1.12
9.
Mellon Bank, N.A.
25,178,909
0.90
10.
HSBC Bank Plc. - Clienth General A/C
23,537,500
0.84
11.
State Street Bank and Trust Company, for Australia
20,107,235
0.72
12.
Social Security Office
20,009,900
0.71
13.
Government Pension Fund
18,802,800
0.67
14.
Investors Bank and Trust Company
16,163,640
0.58
15.
The Bank of New York (Nominees) Limited
15,234,862
0.54
Note: Numbers 4, 5, 7, and 15 are nominee accounts. According to PTT’s investigation with Thailand Securities Depository Co., Ltd., (TSD) the ultimate shareholder’s names could not be disclosed. However, the Ministry of Finance remained the single majority shareholder on behalf of the state, which in part dictated PTT’s management policy. The ministry nominated Directors to the Board, which were approved by the shareholders. Other substantial shareholders, including the four above-mentioned ones, did not exhibit any influence over PTT’s management policy formulation by nominating Directors to the Board.
PTT Public Company Limited
077
Dividend Policy PTT’s dividend policy is to pay out at least 25% of its net profits after deducting various provisional items. Each year’s payout is subject to PTT’s investment plan, justifications, and other future considerations. Upon approval by the Board of Directors, the annual dividend payout is to be presented to the shareholders’ meeting for approval. As regards an interim dividend, however, the Board is authorized to pay it and then report the payout at the next shareholders’ meeting. As a rule, a subsidiary company decides its dividends by comparing its remaining cash balance with its investment capital. If there is sufficient cash after it has set aside cash reserves as required by law, it may pay out dividends.
Organizational Structure At the top of PTT’s organizational structure is the Board of Directors (“The Board”), which consists of four committees: Audit Committee, Nominating Committee, Remuneration Committee, and Corporate Governance Committee. The President, PTT’s top executive, manages the organization through 11 committees. Details of PTT’s management structure appear below:
Board of Directors As reported in the Ministry of Commerce’s certification dated December 13, 2006, the Board consisted of 15 members: ●
14 non-management Directors (9 were Independent, which exceeded half of the entire Board), and
●
1 management Director.
The Board consisted of: No.
Name
Position
Appointed
1.
Mr. Cherdpong Siriwit
Chairman
April 9, 2004
2.
Gen. Apichart Penkitti
Independent Director
November 28, 2006 2.3 (replacing Mr. Somchai Wongsawat)
3.
Mr. Chakramon Phasukavanich
Independent Director
April 9, 2004
4.
Dr. Phadhadej Dhamcharee
Independent Director
April 12, 2005
5.
Gen. Somdhat Attanand
Independent Director
April 11, 2006 1.1
6.
M.L. Panasarn Hasdin
Independent Director
April 11, 2006 1.2
7.
Dr. Ampon Kittiampon
Independent Director
April 12, 2005
8.
Dr. Olarn Chaipravat
Independent Director
April 11, 2006 1.3
9.
Dr. Suchart Thada-Thamrongvech
Independent Director
April 12, 2005
10.
Dr. Pisanu Sunthraraks
Independent Director
April 9, 2004
11.
Dr. Pornchai Rujiprapa
Director
November 28, 2006 2.1 (replacing Mr. Prapan Naigowit)
12.
Mrs. Puntip Surathin
Director
November 28, 2006 2.2 (replacing Mr. Suparat Kawatkul)
13.
078
Mrs. Pannee Sathavarodom
PTT Public Company Limited
Director
July 28, 2005
The Board consisted of: No.
Name
Position
Appointed
14.
Mr. Metta Banturngsuk
Director
April 9, 2004
15.
Mr. Prasert Bunsumpun
Director and Secretary
April 11, 2006 1.3
Notes:
1. The 2006 annual general meeting (AGM) of the shareholders of April 11, 2006 approved the appointments of the following Directors: 1.1 Gen. Somdhat Attanand, replacing Gen. Chaisuk Ketudat, who completed his term. 1.2 M.L. Panasarn Hasdin, replacing Mr. Pala Sookawesh, who resigned on September 22, 2005 on reaching his 65th birthday anniversary 1.3 Dr. Olarn Chaipravat, Mr. Prapan Naigowit, and Mr. Prasert Bunsumpun, all for another term. 2. Appointed Directors to replace resigned Directors: 2.1 Dr. Pornchai Rujiprapa, replacing Mr. Prapan Naigowit, who resigned on September 15, 2006. 2.2 Mrs. Puntip Surathin, replacing Mr. Suparat Kawatkul, who resigned on November 16, 2006. 2.3 Gen. Apichart Penkitti, replacing Mr. Somchai Wongsawat, who resigned on November 24, 2006.
As required by the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET), the Corporate Governance Committee defined an Independent Director as follows: ●
Holds no more than 0.5% of all voting shares in PTT, its affiliates, joint ventures, or juristic persons that may impose conflicts of interest (implicitly including related persons as stated in Section 258 of the Securities and Exchange Act).
●
Does not participate in the management of PTT, its affiliates, or its joint ventures; is not an employee, a regularly paid advisor, an accounting auditor, a legal consultant, other types of consultant, or a person who has control over PTT, its affiliates, or its joint ventures; is not a connected person; and must not have acted in any of the mentioned capacities for at least two years.
●
Has no business relationship, for example, as a customer, supplier, partner, commercial creditor/debtor, loan creditor/debtor; has no interests in any way in the finance or management of PTT, its affiliates, or its joint ventures; and holds no interest in connected juristic persons that may lead to biased views.
●
Is not a close relative – or related in a way that may lead to biased views – of the Management or major shareholders of PTT, its affiliates, or its joint ventures, or of connected juristic persons; and must not be appointed to protect the interest of any Director or major shareholder.
Share Ownership by PTT Directors in 2005 and 2006
No.
Name
No. of Shares as of December 31, 2005
Increment
Note
2006
1.
Mr. Cherdpong Siriwit
-
-
-
2.
Gen. Apichart Penkitti
N.A.
9,000
N.A.
Appointed on November 28, 2006 (replacing Mr. Somchai Wongsawat)
3.
Mr. Chakramon Phasukavanich
4.
Dr. Phadhadej Dhamcharee
5.
Gen. Somdhat Attanand
6.
M.L. Panasarn Hasdin
7.
Dr. Ampon Kittiampon
10,000
10,000
-
-
N.A.
-
-
Appointed on April 12, 2005
-
N.A.
Appointed on April 11, 2005
N.A.
-
N.A.
Appointed on April 11, 2005
-
-
-
Appointed on April 12, 2005
PTT Public Company Limited
079
Share Ownership by PTT Directors in 2005 and 2006
No.
Name
No. of Shares as of December 31, 2005
8.
Dr. Olarn Chaipravat
Increment
Note
2006
-
-
-
Reappointed to another term on April 11, 2006
9.
Dr. Suchart Thada-Thamrongvech
-
-
-
10.
Dr. Pisanu Sunthraraks
-
-
-
11.
Dr. Pornchai Rujiprapa
N.A.
-
N.A.
Appointed on April 12, 2005
Appointed on November 28, 2006 (replacing Mr. Prapan Naigowit)
12.
Mrs. Puntip Surathin
N.A.
10,000
N.A.
Appointed on November 28, 2006 (replacing Mr. Suparat Kawatkul)
13.
Mrs. Pannee Sathavarodom
4,000
4,000
-
Appointed on July 28, 2005 (replacing Mr. Wisudhi Srisuphan)
14.
Mr. Metta Banturngsuk
15.
Mr. Prasert Bunsumpun
-
-
-
325,820
325,820
-
Reappointed to another term on April 11, 2006
Directors Who Resigned or Whose Terms Expired in 2006
No.
Name
No. of Shares as of December 31, 2005
Increment
Note
2006
1.
Gen. Chaisuk Ketudat
-
-
-
Term expired on April 11, 2006
2.
Mr. Prapan Naigowit
-
-
-
Resigned on September 15, 2006
3.
Mr. Suparat Kawatkul
-
*
2,000
2,000*
As of the date of resignation (November 16, 2006)
4.
Mr. Somchai Wongsawat
-
-
-
Resigned on November 24, 2006
The Directors whose signatures are recognized as binding on the Company were (1) Mr. Prasert Bunsumpun, President, authorized to sign and affix the Company’s seal, or (2) two other Directors, authorized to jointly sign and affix the Company’s seal.
Authority of the Board of Directors ●
The Board is authorized to supervise and manage the Company in compliance with relevant laws, objectives, regulations, and resolutions of shareholders’ meetings.
●
The Board is to elect one Director to serve as Chairman. If deemed by the Board as suitable, one or more Vice Chairman may be elected.
●
080
The Board is to elect one Director to serve as President and Secretary to the Board, as deemed suitable.
PTT Public Company Limited
Duties and Responsibilities of the Board The Board is to: ●
Carry out their duties in accordance with relevant laws, objectives, regulations, and resolutions of shareholders’ meetings.
●
Establish the Company’s vision, directions, and strategies.
●
Endorse major Company strategies and policies, including objectives, financial targets, and operating plans; monitor and ensure plan implementation.
●
Ensure proper systems for corporate accounting, financial reporting, and financial auditing; ensure efficient and effective internal control and internal audit systems.
●
Monitor and remedy problems arising from conflicts of interest and connected transactions.
●
Establish prudent risk management guidelines; and ensure an efficient risk management system or procedures.
●
Ensure a suitable compensation system or mechanism for Senior Management, to induce short-term and long-term motivation.
●
Assess the performance of the President and determine suitable compensation.
●
Ensure suitable channels for communicating with each group of shareholders and stakeholders.
●
Ensure correct, clear, transparent, reliable, and high-quality disclosure of information.
●
Show leadership and lead by example.
Appointment and Dismissal of Directors 1. The Board consists of at least 5 but no more than 15 persons elected at the Company’s shareholders’ meetings. It consists of a minimum of 3 Independent Directors, at least half of the Directors are to reside in Thailand, and at least 1 Director must be qualified in finance and accounting. All Directors must meet legal requirements and Company regulations. In 2004, the Board decided that Independent Directors were to make up at least half of the Board, and that decision is in effect today. 2. The shareholders’ meetings are to elect qualified Directors who have previously been selected and nominated by the Nominating Committee under the following criteria and procedures: (1) Each shareholder has one vote per share held. (2) Each shareholder exercises all votes applicable under (1) in electing one or more persons as Directors, but cannot allocate only part of his or her votes to any nominee. (3) Candidates with the most votes are to be appointed Directors according to the number required. (4) If more candidates receive equal votes than the number of Directors required, the chairman of the meeting must cast a vote to decide which one(s) is/are appointed. 3. At every AGM, one-third of the Directors – or if this number is not a multiple of three, then the number nearest to one-third – must retire from office. The names of the Directors to retire during the first and second year after the Company was listed are to be drawn by lots. For subsequent years, the Directors with the longest terms must retire. 4. Any Director wishing to resign may submit a resignation letter to the Company. The resignation is to be effective on the date that the Company receives the letter. 5. In voting for the dismissal of Directors from office before expiry of their terms, a three-quarter (3/4) vote of eligible shareholders present at the meeting is required, provided that the number of shares represented by the three-quarters vote is at least half of the total number of shares represented by the total number of eligible shareholders present at the meeting.
PTT Public Company Limited
081
The duties and responsibilities of the President are as follows: Under the Articles of Association of the Company, the President has full authority and duties to manage the Company’s business as assigned by the Board. Business is to be managed strictly, prudently, and with integrity under the plan or budget approved by the Board, and must be in the best interests of the Company and its shareholders. The President’s authority and duties include the following matters and activities: ●
Operate and/or manage day-to-day Company business
●
Hire, appoint, remove, transfer, promote, demote, reduce the salary or wages of, take disciplinary action against employees and contractors, and dismiss any employee or contractor as specified by the Board’s regulations. For department heads or other positions, approval of the Board is required.
●
Ensure the preparation and submission of business policies, including the operating plans and budgets, to the Board for approval, and report performance against them to the Board every three months.
●
Ensure the implementation of the policies, plans, and budgets approved by the Board.
Authority Given by the Board The Board authorizes the President to act on behalf of the Company under the following conditions and scopes: ●
Manage business under all objectives, regulations, policies, rules, specifications, directives, and resolutions of the meetings of the Board and/or resolutions of shareholders’ meetings.
●
Order, contact, command, implement, and sign legal contracts, documents, orders, announcements, or any correspondence with government agencies, state enterprises, or other parties; and engage in any necessary and appropriate action that would facilitate the duty specified above.
●
Command each employee and contractor and hire, appoint, remove, promote, demote, reduce the salary or wages of, take disciplinary action against, and dismiss any employee or contractor under the rules, regulations, or directives of the Board. For employees or contractors serving as advisors, experts, executive vice presidents, or equivalent or higher positions, approval of the Board is required. The President is also authorized to specify the employment conditions for employees and contractors, and issue rules governing Company operations, provided they do not conflict with rules, regulations, or directives of the Board.
●
Assign the power of attorney and/or delegate specific tasks to other persons, provided that such assignment and/or delegation complies with such document concerning the power of attorney and/or rules, regulations, or directives of the Board and/or the Company.
These authorities and duties of the President are invalid if there is any conflict of interest with the Company in any form resulting from the President’s exercise of powers.
The Audit Committee The Board approved the appointment of the Audit Committee on October 1, 2001, which consists of Directors with the qualifications specified by securities and exchange laws and SET. The Committee consists of at least 3 members, at least 1 of whom must be qualified in accounting and finance. The Audit Committee currently consists of 4 Independent Directors. Name
Position
Remark
1. Dr. Olarn Chaipravat
Chairman
Independent Director with qualifications in finance and accounting
2. Dr. Phadhadej Dhamcharee
Member
Independent Director with qualifications in finance and accounting
3. Dr. Suchart Thada-Thamrongvech
Member
Independent Director with qualifications in finance and accounting
Mr. Trakul Chatdarong, Executive Vice President, Office of Corporate Audit, served as the Committee’s secretary. (Note: Mr. Prapan Naigowit resigned from the Board on September 15, 2006)
082
PTT Public Company Limited
Duties and Responsibilities of the Audit Committee ●
Review the Company’s financial reporting process to ensure accuracy and adequacy.
●
Ensure the suitability and effectiveness of internal control and internal audit procedures.
●
Ensure compliance with securities and exchange laws, SET regulations, and relevant laws.
●
Consider, select, nominate, and recommend the fee for the external auditor.
●
Consider the accurate and complete disclosure of Company information in case of connected transactions or potential conflicts of interest.
●
Prepare a report on the Committee’s supervision of business for disclosure in the annual report, to be signed by Chairman.
●
Perform tasks assigned by the Board and with the approval of the Committee.
●
Perform duties as specified by Company regulations.
The Committee held 12 meetings in 2006 and duly reported its findings to the Board. In addition, the Committee participated in quarterly financial audits along with the external auditor and the Finance and Accounting Department.
The Nominating Committee The Board appointed the Nominating Committee on October 1, 2001, currently consisting of 3 Directors - both independent and non-independent.
Name
Position
Remark
1. Mr. Chakramon Phasukwanich
Chairman
Non-management, Independent Director
2. Dr. Ampon Kittiampon
Director
Non-management, Independent Director
3. Mrs. Puntip Surathin
Director
Non-management Director
(Note: Mr. Suparat Kawatkul, former Chairman of the Nominating Committee, resigned from the Board on November 16, 2006.)
Duties and Responsibilities of the Nominating Committee ●
Select qualified nominees as candidates for new Directors or President.
●
Design the procedures and criteria for the nomination of Directors or President to ensure transparency.
The procedure for the nomination of Directors is as follows: 1. The Committee establishes the qualifications for Directors that need replacement to ensure that the new Directors meet the criteria and qualifications as required by related laws and regulations. The Committee also establishes the procedures for nominating qualified candidates. 2. The Committee summarizes its results of the nomination process and presents to the Board a shortlist of qualified candidates for directorship along with supporting reasons. 3. The Board selects the candidates with suitable qualifications from the list prepared by the Committee and submits the names of selected candidate(s) to the shareholders’ meeting for approval. In 2006, the Committee held two meetings and duly reported its findings to the Board.
PTT Public Company Limited
083
The Remuneration Committee The Board appointed the Remuneration Committee on October 1, 2001, currently consisting of 3 Directors - both independent and non-independent ones - as follows.
Name
Position
Remark
1. Dr. Ampon Kittiampon
Chairman
Non-management, Independent Director
2. Dr. Pisanu Sunthraraks
Director
Non-management, Independent Director
3. Mrs. Pannee Sathavarodom
Director
Non-management Director
(Note: Mr. Somchai Wongsawat, former Chairman of the Remuneration Committee, resigned from the Board on November 24, 2006.)
Duties and Responsibilities of the Remuneration Committee ●
Consider compensation guidelines for Directors and the President.
●
Design the procedures and criteria for fair and reasonable compensation for Directors and the President for approval at shareholders’ meetings.
The Committee held one meeting in 2006 and duly reported its findings to the Board.
Corporate Governance Committee The Board appointed the Committee on June 24, 2004, consisting of 3 Independent Directors as follows:
Name
Position
Remark
1. Dr. Suchart Thada-Thamrongvech
Chairman
Non-management, Independent Director
2. Gen. Somthad Attanand
Director
Non-management, Independent Director
3. Dr. Pisanu Sunthraraks
Director
Non-management, Independent Director
The Vice President, Office of the President / the Company Secretary, served as the committee’s secretary. (Note: Mr. Prapan Naigowit, former Chairman of the Corporate Governance Committee, resigned from the Board on September 15, 2006.)
Duties and Responsibilities of the Corporate Governance Committee ●
Propose corporate governance guidelines to the Board.
●
Advise the Board on matters concerning corporate governance.
●
Ensures that the duties and responsibilities of Directors and the Management comply with corporate governance practices.
●
Revise guidelines for PTT’s corporate governance for compatibility with those of international organizations, and present its proposal for revisions to the Board.
●
Convey corporate governance policies to the Corporate Governance Task Force.
The Committee held two meetings in 2006 and duly reported its findings to the Board.
084
PTT Public Company Limited
Management A Management Committee was appointed on October 1, 2001, currently consisting of 7 members: Name
Position
1. President
Chairman
2. Senior Executive Vice President, Corporate Support
Member
3. Senior Executive Vice President, Corporate Finance and Accounting
Member
4. Senior Executive Vice President, Oil Business Group
Member
5. Senior Executive Vice President, Exploration & Production and Gas Business Group
Member
6. Senior Executive Vice President, Petrochemicals and Refining Business Group
Member
7. Senior Executive Vice President, Corporate Strategy and Development
Member and Secretary
The Vice President, Office of the President / Company Secretary served as the Assistant Secretary. The Management Committee held 34 meetings in 2006 and duly reported its findings to the Board.
Duties and Responsibilities of the Management Committee ●
Provide advice and recommendations to the President on matters concerning corporate strategy and business direction, investment planning, budgeting, allocation of resources for PTT and its affiliates; and ensure that PTT affiliates have business processes that are consistent with those of PTT.
●
Rank decisions made by the Board to ensure effective implementation.
●
Screen meeting agendas before presentation to the Board.
●
Rank matters concerning the allocation of human and financial resources for PTT and its affiliates.
●
Jointly decide significant issues about PTT affiliates before the meeting of the Board of each affiliated company.
●
Establish standards for business administration, human resource management, information management, and the organizational structure for PTT and its affiliates.
●
Establish a policy for human resource management and administration.
In addition, the Company appointed 10 committees to oversee specific areas of work for accurate, appropriate, efficient, and effective implementation: ●
Oil Business Group Management Committee
●
Exploration & Production and Gas Business Group Management Committee
●
Petrochemicals and Refining Business Group Management Committee
●
Corporate Plan Committee
●
Corporate Finance & Accounting Committee
●
Corporate Human Resources Committee
●
PTT Credit Committee
●
Supply Chain Management Committee
●
Research and Technology Institute Board of Management Committee
●
Risk Management Committee.
PTT Public Company Limited
085
Names of Management team members as of December 31, 2006 No.
Name
Position
1.
Mr. Prasert Bunsumpun
President
2.
Mr. Anon Sirisaengtaksin
Senior Executive Vice President, Corporate Strategy & Development
3.
Mr. Pichai Chunhavajira
Senior Executive Vice President, Corporate Finance and Accounting
4.
Mr. Songwut Chinnawat
Senior Executive Vice President, Corporate Support
5.
Dr. Chitrapongse Kwangsukstith
Senior Executive Vice President, Exploration & Production and Gas Business Group
6.
Mr. Chaiwat Churitti
Senior Executive Vice President, Oil Business Group
7.
Dr. Prajya Phinyawat
Senior Executive Vice President, Petrochemicals and Refining Business Group
8.
Dr. Viroj Mavichak
Senior Executive Vice President, on secondment to Managing Director, Thai Oil Public Company Limited, (effective January 1, 2006)
9.
Mr. Aditheb Bisalbutr
Senior Executive Vice President, on secondment to President, PTT Chemical Public Company Limited
10.
Mr. Permsak Shevawattananon
Senior Executive Vice President, on secondment to President, The Aromatics (Thailand) Public Company Limited
11.
Mr. Maroot Mrigadat
Senior Executive Vice President, on secondment to President, PTT Exploration and Production Public Company Limited (effective March 1, 2006)
12.
Ms. Penchan Charikasem
Executive Vice President, Corporate Finance
13.
Ms. Prisana Prahankhasuek
Executive Vice President, Corporate Accounting (effective December 1, 2006)
Management’s Ownership of Shares Warrant # 1
Warrant # 2
Remaining
No.
Name
2005
2006
Increment
Allocated
after
Allocated
in
1/2005
in
exercise
2006
2005
Remark
Aug. 31, 2006
1.
Mr. Prasert Bunsumpun
325,820
325,820
-
243,000
182,300
119,000
-
2.
Mr. Anon Sirisaengtaksin
70,030
89,930
19,900
79,800
59,900
41,900
-
3.
Mr. Pichai Chunhavajira
-
22,000
22,000
88,000
66,000
45,800
-
4.
Mr. Songwut Chinnawat
16,876
32,076
15,200
61,000
45,800
32,400
-
5.
Dr. Chitrapongse Kwangsukstith
124,630
129,730
5,100
108,700
103,600
56,900
-
6.
Mr. Chaiwat Churitti
68,000
57,000
(11,000)
62,100
62,100
32,900 Appointed on November 1, 2005
7.
Dr. Prajya Phinyawat
101,980
133,980
32,000
88,300
66,300
45,900
8.
Dr. Viroj Mavichak
101,980
123,880
21,900
87,800
65,900
45,100 Appointed on January 1, 2006
9.
Mr. Aditheb Bisalbutr
28,809
118,809
90,000
65,900
65,900
34,700 Appointed on April 1, 2005
10.
Mr. Permsak Shevawattananon
59,564
75,694
16,130
64,000
48,000
33,300 Appointed on March 1, 2006
11.
Mr. Maroot Mrigadat
-
-
-
67,200
67,200
35,100 Appointed on March 1, 2006
12.
Ms. Penchan Charikasem
5,132
7,132
2,000
34,000
32,000
18,300 Appointed on December 7, 2005
13.
Ms. Prisana Prahankhasuek
29,363
38,063
8,700
35,100
26,400
18,400 Appointed on June 1, 2006
086
PTT Public Company Limited
-
Additional Information for the Board and Management Records showed no violation of the law within the past ten years regarding: (1) being sentenced for criminal charges or under criminal lawsuits, except for violation of traffic law, minor charges, or similar charges (2) being sentenced to bankruptcy or having assets controlled (3) serving as the management or a person with authority in a company or partnership sentenced to bankruptcy or whose assets are controlled.
Board of Directors Self-Assessment As a resolution of Board meeting No. 11/2549 on November 30, 2006, the Board approved self-assessment forms proposed by the Corporate Governance Committee, relying on the same approach as the one used in 2005. The form was to be used to conduct self-assessment of the Board’s performance in 2006, a vital tool for improving the Board’s performance and reference data for corporate governance rating (CG Rating). There were three types of self-assessment, whereby the percentages corresponded to the following levels of performance achieved in each area elaborated below. These are the assessment forms for the entire board, individual self-assessment forms, and cross self-assessments: Over 85%
=
Excellent
Over 75%
=
Very good
Over 65%
=
Good
Over 50%
=
Fair
Below 50%
=
Need improvement.
The findings from the self-assessment were as follows: 1. Self-Assessment of the Board consisted of four categories: Board policy, Board composition, Board practices, and Board meeting. The results indicated excellent/most suitable overall performance with an average score of 90.90%. 2. Self-Assessment of Individual Directors consisted of six categories: accountability for one’s decisions and actions; responsibility in performing the job with full ability and efficiency; equitable treatment of all stakeholders; transparency in job performance and information disclosure; vision to create long-term value; and business ethics. Overall results were excellent for most Directors, with an average score at 94.37%. 3. Individual Assessment of Other Directors (Cross-Assessments) consisted of six identical categories as above so that they may be directly comparable: ●
Accountability
●
Responsibility
●
Equitable treatment
●
Transparency
●
Vision to create long-term value
●
Ethics.
Cross-assessment results in these six categories indicated excellent performance by most Directors, with an average score of 93.89%.
PTT Public Company Limited
087
Compensation of Directors and Management Compensation of Directors: PTT equitably and rationally specifies the compensation of Directors with the oversight of the Remuneration Committee, taking into account each Director’s responsibility, the Company’s financial performance, and compatibility with the rest of the industry. Two portions of compensation are currently paid: meeting allowances and bonuses. Directors appointed to specific committees are paid additional allowances to reflect their additional responsibilities. Directors’ compensation has been approved by the shareholders as follows: (1) Directors’ compensation The following compensation structure was approved at the AGM on Tuesday, April 11, 2006, for the Board in 2006: 1. Meeting Allowances 1.1 Board Meeting compensation consisted of: - Monthly allowance (retainer allowance) of Baht 30,000 each - Meeting allowance of Baht 20,000 each time (for those in attendance only). 1.2 Compensation for meetings of Committees consisted of: 1.2.1 Audit Committee - Monthly allowance of Baht 15,000 each - Meeting allowance of Baht 15,000 each time (for those in attendance only) The Secretary received a monthly allowance of Baht 7,500. 1.2.2 Compensation for the three remaining committees (Nominating, Remuneration, and Corporate Governance Committees) consisted of: - Meeting allowance of Baht 24,000 each time (for those in attendance only). 1.2.3 Compensation for the Chairman of each committee was 25% higher than for other committee members. 2. Directors’ Bonuses for 2006: The bonus payout to each Director corresponded to Company performance and net income, and equaled 0.05% of the net income for 2006, and was up to Baht 2,000,000 per person. The bonus was pro-rated to the duration of each directorship, with the Chairman receiving 25% more than individual Directors. The total compensation for each Director in 2006 appears below: Unit : Baht
No.
Name
Days
Bonus
Board
Committee
Total
Meeting
Meeting
Meeting
Allowance
Allowance
Allowance
Total Compensation
1.
Mr. Cherdpong Siriwit
365
2,500,000.00
775,000.00
-
775,000.00
3,275,000.00
2.
Gen. Apichart Penkitti
31
169,863.01
50,000.00
-
50,000.00
219,863.01
3.
Mr. Chakramon Phasukavanich
365
2,000,000.00
600,000.00
48,000.00
648,000.00
2,648,000.00
4.
Dr. Phadhadej Dhamcharee
365
2,000,000.00
640,000.00
330,000.00
970,000.00
2,970,000.00
5.
Gen. Somdhat Attanand
296
1,452,054.79
479,000.00
48,000.00
527,000.00
1,979,054.79
6.
M.L. Panasarn Hasdin
296
1,452,054.79
479,000.00
-
479,000.00
1,931,054.79
7.
Dr. Ampon Kittiampon
365
2,000,000.00
640,000.00
48,000.00
688,000.00
2,688,000.00
8.
Dr. Olarn Chaipravat
365
2,000,000.00
640,000.00
412,500.00
1,052,500.00
3,052,500.00
9.
Dr. Suchart Thada-Thamrongvech
365
2,000,000.00
640,000.00
330,000.00
970,000.00
2,970,000.00
10.
Dr. Pisanu Sunthraraks
365
2,000,000.00
640,000.00
72,000.00
712,000.00
2,712,000.00
11.
Dr. Pornchai Rujiprapa
31
169,863.01
50,000.00
-
50,000.00
219,863.01
088
PTT Public Company Limited
Unit : Baht
No.
Name
12.
Mrs. Puntip Surathin
13.
Days
Bonus
Board
Committee
Total
Meeting
Meeting
Meeting
Allowance
Allowance
Allowance
Total Compensation
31
169,863.01
50,000.00
-
50,000.00
219,863.01
Mrs. Pannee Sathavarodom
365
2,000,000.00
640,000.00
24,000.00
664,000.00
2,664,000.00
14.
Mr. Metta Banturngsuk
365
2,000,000.00
640,000.00
-
640,000.00
2,640,000.00
15.
Mr. Prasert Bunsumpun
365
2,000,000.00
640,000.00
-
640,000.00
2,640,000.00
Directors Who Resigned or Whose Terms Expired in 2006 Unit : Baht
No.
Name
Days
Bonus
Board
Committee
Total
Meeting
Meeting
Meeting
Allowance
Allowance
Allowance
Total Compensation
1.
Gen. Chaisuk Ketudat
100
547,945.21
161,000.00
-
161,000.00
708,945.21
2.
Mr. Prapan Naigowit
257
1,408,219.18
434,000.00
292,000.00
726,000.00
2,134,219.18
3.
Mr. Suparat Kawatkul
319
1,747,945.21
555,000.00
30,000.00
585,000.00
2,332,945.21
4.
Mr. Somchai Wongsawat
327
1,791,780.82
503,000.00
30,000.00
533,000.00
2,324,780.82
29,409,589.03 9,256,000.00 1,664,500.00 10,920,500.00
40,330,089.03
Total
Directors’ Compensation in 2004 - 2006 Unit : Baht
2004
Compensation
2005
2006
Directors
Baht
Directors
Baht
Directors
Baht
Meeting Allowance
15
9,207,500.00
(15) 14
10,707,750.00
15
10,920,500.00
Total Bonus
15
13,725,000.00
(15) 14
17,777,260.27
15
29,409,589.04
Total
22,932,500.00
28,485,010.27
40,330,089.04
Compensation for Management: The compensation of Management team members complies with the policies and principles specified by the Board. It is tied to PTT’s operating results through its Performance Agreement (PA) under an assessment system for state enterprises. The President and the rest of the Management establish Key Performance Indicators (KPI) as well as targeted indices for each year. These indices serve as a guideline for business operation and a basis for the Remuneration Committee in assessing the performance of the President and all managers. Each person’s compensation is determined against performance with industry standards. The Remuneration Committee then proposes the compensation along with compensation guidelines to the Board for review and approval.
PTT Public Company Limited
089
In 2006 the President and 7 Management executives received Baht 76,814,760.00 in compensation (excluding one senior executive seconded to and paid by a PTT affiliate), detailed as follows: Total Compensation of Senior Management Unit : Baht
2005 Compensation
2006
Persons
Paid Amount
Persons
Paid Amount
Salary
8
45,135,600
7
45,145,920
Bonus
8
22,170,695
7
31,668,840
Total
67,306,295
76,814,760
Provident Fund for Senior Management Unit : Baht
2005
2006
Compensation Persons
Paid Amount
Persons
Paid Amount
Provident Fund
7
3,062,216.00
6
3,005,232.00
Total
7
3,062,216.00
6
3,005,232.00
Personnel Realizing that the quality of its people is the key to its success as a high-performance organization, throughout its 28 years of existence PTT has been committed to the development of a human resource management system on par with technological advancement and industry standards. The Company promotes both conscientious merit and business competence for its employees, and encourages them to actively take part in public service activities. It is on employees that PTT focuses in its development toward a High Performance Organization (HPO) to compete better and respond to prevailing circumstances around the Company. The number of PTT employees as of December 31, 2006 was 3,184. Throughout 2006, PTT carefully managed its manpower to best reflect its operation, with a focus on business groups with significant expansion and investment plans in line with national economic development. The most prominent ones were the Exploration & Production and Gas Business Group; the Petrochemicals and Refining Business Group; and the Trading Business. These were core groups and businesses where manpower is being added to. Besides formulating human resource plans to suit business circumstances, PTT has undertaken a plan to develop the potential of its employees and streamline its business procedures.
090
PTT Public Company Limited
(1) Number of Personnel and Compensation The head counts for major functions as of year-end 2005 and 2006 were as follows: Unit : Persons
Major Function
As of Year-end 2005 PTT
1. Exploration and Production and Gas 2. Oil 3. Petrochemicals and Refining 4.
As of Year-end 2006
Consolidated PTT
PTT
Consolidated PTT
963
963
1,057
1,057
1,302
1,302
1,239
1,239
51
51
64
64
840 1)
932 2)
824 1)
Support Staff, Secondees to PTT Affiliates
5. Subsidiaries and Joint Ventures Total 1)
Excludes PTT secondment to affiliates.
2)
Includes PTT secondment to affiliates.
1,075 2)
-
4,687
-
5,118
3,156
7,935
3,184
8,553
Compensation of Personnel (excluding President and Senior Management) Unit : Baht
Compensation
2005
2006
Salary
2,020,836,159.33
2,313,239,842.61
Bonus
996,368,672.00
1,138,238,033.75
Provident Fund
199,951,973.02
228,214,687.17
Others
800,492,308.37
993,909,544.34
4,017,649,112.72
4,673,602,107.87
Total
(2) Other Compensation PTT has in place employee welfare and other forms of compensation apart from salary, bonus, and provident fund contribution for management and all employees. These reflect domestic economic conditions, cost of living, and other standards for companies of the same business, and include rent allowance, relocation, and overtime pay. In 2006, PTT allocated 20 million units of warrants, or rights to purchase common shares, to the President, the Management, employees, and employees from affiliated companies serving PTT, as an incentive for their full and consistent dedication to PTT. This incentive was designed to create a sense of ownership and encourage participation in the management and development of the Company – benefiting PTT’s performance and business operations. Management team members and employees would each receive four warrants, each equivalent to 25% of the total units received by each person, who can exercise their first warrant by purchasing common shares one year after the warrant was issued – at one unit of warrant per share. Similarly, the second, third, and fourth warrants can be exercised two, three and four years respectively after the date of issue. Expiring five years after the date of issue, the warrants can be exercised every three months on the last day of each period until their expiry.
PTT Public Company Limited
091
(3) Personnel Development To become a High Performance Organization, during the year PTT improved the process and mechanism for human resource management to ensure higher efficiency and realize the full potential of its people. Through these improvements, PTT personnel would be able to fully demonstrate their competence, advance in their careers, and continue to grow with the Company. The elements of the Company’s success include: Implementing Learning Organization Mechanisms for Sustainable Organization PTT developed its knowledge management system for essential information relevant to its business and encourages everyone to do the same and update this regularly. The Company makes available such system for all to use, to facilitate learning and efficient problem solving while actively promoting employees’ own development of their potential - for this is the cornerstone to a High Performance Organization. The President of PTT has shared his following views on the Learning Organization. “To become a Learning Organization, we rely on human intelligence. Learning is an ongoing, lifetime process.” Building Competent and Righteous Members of PTT and Society Besides a human resource management system focusing on making PTT employees smart and responsive to Company expectations, PTT recognizes its role of turning out people with conscience, ready to participate in social development and public services. PTT has its corporate governance principles for all to observe, as it firmly believes that achievement of competence and righteousness is synonymous to achievement of sustainable growth for PTT. Participating in Decision-making on Corporate Goals and Directions PTT focuses on broad participation in the Company in designing business plans to suit its direction and targets, as this will efficiently align all parts of the Company. To this end, PTT institutes an annual process to draw up its vision and corporate direction, whereby senior management of PTT and its affiliates along with support staff jointly define such vision and direction before propagating the agreed items for other units to use in defining business strategies and business plans, and to come up with budget plans aligning with PTT’s broad direction. In 2006, all PTT employees defined individual objectives and key performance indicators (KPIs) to align with Company and departmental directions and their own responsibility. These individual objectives and KPIs serve as performance framework and assessment tools for each person. Creating Synergy for PTT Group’s Synergy In line with PTT’s policy to conduct its petroleum and petrochemical businesses in an integrated fashion, it needs a coherent overall policy management, and therefore it is applying its human resource management system in the form of a PTT Group, designed to enable all standards for human resource management and development to facilitate transfers and rotation of executives and staff for maximum efficiency. In 2006, PTT and its subsidiaries jointly defined the Group’s common culture and instituted personnel recruitment and training systems, as the executives of PTT and affiliates firmly believed that the PTT Group allowed for leveraging synergy derived from each company to in turn strengthen the efficiency of human resource management, as opposed to individual Companies’ practices.
092
PTT Public Company Limited
Developing Employees’ Career Paths in Line with Corporate Business At the heart of human resource management is human resource development. PTT has developed career management processes for greater efficiency through the appointment of Career Counseling Teams (CCT) and a Career Management Counseling Committee (CMCC), which are charged with defining and developing employees’ individual competence in support of PTT’s future business. The objective of career management processes is to give employees maximum professional competence and expertise, the development of which will be defined by the Company. Development may be in the form of training programs, job rotation, and appointment and promotion of employees to suit their responsibility and potential. Properly implemented, this employee development will result in employees with the competence desired by both the individuals and the Company - leading to PTT’s ultimate achievement. Fostering Positive Relations between Management and Staff to Reach the Same Goal Communication between Management and staff at PTT comes in various forms. All employees need to be aware of corporate business, obstacles, and potential repercussions, and should be allowed to share their views and take part in business efficiency improvement. In 2006, the President had meetings with the employees of each administrative level as follows: - Executive Vice Presidents
1
- Vice Presidents
2
- Division Managers
1
- Other employees
1
Besides the monthly labor relations committee meetings, PTT held Joint Consultative Committee (JCC) meetings between its management team and staff of regional offices nationwide. In addition, the President and senior management team members held regular meetings with employees both in Bangkok and around the country, and surveyed employees’ satisfaction to hear views and suggestions for improvement. PTT firmly believes that proper communication and information exchange among all will lead to positive relations among everyone, which will efficiently lead the organization to the same goal.
PTT Public Company Limited
093
Corporate Governance
94
PTT Public Company Limited
CORPORATE GOVERNANCE One of the most convincing proofs of PTT being a public company limited with good corporate governance (CG) practices since its listing on the Stock Exchange of Thailand (SET) in late 2001 was the various acclaims together with high ratings by organizations, offices, and public as well as private institutions, both domestic and international. Notable examples in 2006 included: ●
Best Corporate Governance award for the 2nd consecutive year from FinanceAsia Magazine in May.
●
Three awards from “SET Awards 2006” voted by SET and Finance & Banking Magazine on July 26, 2006 in the categories of: 1. Best Corporate Social Responsibilities (CSR) Award for outstanding listed companies in socially-responsible business conduct. 2. Best Investor Relations Award for outstanding listed companies with efficient investor relations activities. 3. Distinction in Maintaining Excellent Corporate Governance Report for outstanding listed companies with a consistent standard for reporting good corporate governance for the third year.
●
Recognition Awards 2006, The BEST of ASIA award, from Hong Kong-based Corporate Governance Asia Magazine on September 20, 2006. Four Thai companies won such recognition, namely PTT, SCC, K-Bank and AIS. The selection criteria included: 1. Recognition of CG performance 2. Participation in activities directly related to the promotion and improvement of CG practices over the past 12 months.
●
Thailand Corporate Excellence Awards for its Commitment to Social and/or Environmental Issues from the Thailand Management Association in conjunction with Sasin Graduate Institute of Business Administration of Chulalongkorn University on September 28, 2006.
●
PTT was named 1 of 9 companies with “excellent” scores by the National Corporate Governance Committee with the support of the Thai Institute of Directors (IOD) Association, SET, and Office of the Securities & Exchange Commission (OSEC) on October 27, 2006; based on a survey project on corporate governance among listed companies.
●
Outstanding State Enterprise in 2006 Award from the Ministry of Finance on November 15, 2006 in two areas: Board of Directors and Social Programs.
●
Asiamoney’s Corporate Governance Polls from Asiamoney Magazine for December 2006/January 2007 in seven areas: 1. Best Overall Company in Thailand for Corporate Governance 2. Best for Disclosure and Transparency in Thailand 3. Best for Shareholders’ Rights and Equitable Treatment in Thailand 4. Large-Cap. Corporates of the year in Thailand 5. 2nd Best Company in Asia for Corporate Governance 6. 2nd Best for Disclosure and Transparency in Asia 7. 2nd Best for Shareholders’ Rights and Equitable Treatment in Asia.
PTT Board of Directors is committed to conducting its business in compliance with the good corporate governance principles and the guidelines laid down by the Securities and Exchange Commission and Stock Exchange of Thailand. PTT has been adhering to apply corporate governance as its guiding principle in conducting business for efficient management and sustainable business growth. According to PTT regulations, “The Company must have and implement a policy on its business ethics, including the ethics of its Board of Directors, Management, and employees in compliance with good corporate governance practices as its code of conduct for the proper conduct of the organization with high standard.”
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PTT subsequently issued rules on good corporate governance and published them as a handbook. And in 2005, to update and internationalize it, PTT came up with Revision 1/2005 of the handbook for current enforcement. The essences of its corporate governance practices appear below:
1. Corporate Governance Policy ●
Appointing Four Committees (or Subcommittees)
The Board of Directors (“The Board”) highly values corporate governance by initially appointing three committees, namely the Audit Committee, the Nominating Committee, and the Remuneration Committee. For a period, the Audit Committee also looked after corporate governance. In 2004, the Board set up a Corporate Governance Committee, charged with promotion and screening of corporate governance and promotion of excellence in such areas. Therefore, PTT today has four committees investigating critical matters under the corporate governance principles to create maximum benefit for shareholders, taking into account the overall stakeholders’ concerns and interests, business ethics, and transparency. Each of these committees consists of qualified Directors as required by SET, with clearly written roles and responsibilities. Please see details about the four committees under the “Shareholders and Management Structures” section (page 82-84.) ●
Establishing a Corporate Governance Policy
The Board has defined a policy on corporate governance to be observed by all: 1. In their conduct of business, the Board, the Management, and all employees are committed to the six concepts of corporate governance, namely Accountability, Responsibility, Equitable Treatment, Transparency, Vision to Create Long-Term Value, and Ethics. An organizational structure is in place to balance the roles of the Board, the Management, and shareholders. 2. Directors must perform their duties independently with full commitment and responsibility. There is a clear division of responsibilities between the Chairman and the President. 3. The Board has a key role in the formulation of corporate visions, strategies, policies, and critical plans with due regard for risk factors and suitable risk management. It must also ensure the credibility of the accounting system, financial statements, and accounting audits. 4. The Board must lead the rest of PTT on ethics and corporate governance, and supervise the management and solution to any conflict of interest or connected transactions. 5. The Board may appoint committees to help it screen critical issues. 6. The Board must undergo annual self-assessment to obtain a framework for its performance assessment. 7. The Board must establish a Code of Conduct for itself, the Management, employees, and all contract employees to observe in addition to PTT’s rules and regulations. 8. Disclosure of financial and non-financial information must be done adequately, credibly, and promptly so that shareholders and stakeholders may get information equitably. The Capital Market & Investor Relations Department is responsible for such disclosure to investors and the general public. 9. PTT shareholders must receive equitable treatment and have the right to access information through suitable communication channels with PTT. 10. There must be a proper selection procedure for the appointment of key management personnel under a fair and transparent nomination process.
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PTT Public Company Limited
The Corporate Governance Committee defined the code of conduct and guidelines for the Board and modified the contents of the PTT handbook on corporate governance to better conform to international practices. The revised handbook provided highlights of key topics with essential details for completeness and relevance to the corporate governance policy. PTT Handbook of Good Corporate Governance (Revision 1/2005) is given to each person serving the Company to sign, acknowledge, and observe. In compliance with Company policy, all Directors were encouraged to attend training courses organized by the Thai IOD and relevant institutes to add to their knowledge of the roles being performed for PTT. They were notified of upcoming training and enrolled through the year. ●
Self-Assessment of the Board
The Board instituted a review of its self-assessment that is similar to the process in 2005. There were three assessment types, namely group assessment, individual self-assessment, and individual cross-assessment to help Directors review their performance together with issues and obstacles identified during the year. Findings were then analyzed and recommendations made for performance improvements as shown in the “Shareholders and Management Structures” section (page 87.) ●
Corporate Governance Activities
The Corporate Governance Committee was assigned to promote and screen corporate governance matters. The Company actively campaigned for compliance with corporate governance principles. A working group on corporate governance of employees, headed by an Executive Vice President, implemented various matters under the policy and conducted campaigns to instill awareness for responsibility under the principles in Directors, the Management, and employees. Periodic promotional campaigns were conducted through various media within PTT, including exhibits, CG Website that is packed with information, and two-way communication channels. Internal news broadcast, video shows, a CG column in the “PTT Spirit” magazine, and a CG-Digest via email-newsletters are among the publicity and awareness tools, with positive responses from employees. In addition, the Corporate Governance Committee distributed the English version of the Corporate Governance Handbook (1st Revision) to investors, international interested parties, and stakeholders for their reference. This will also be publicized on PTT’s website. ●
Launching Open Houses
In 2006, PTT asked all shareholders whose names were registered on the company’s roster as of the day of interim dividend payment to notify PTT of their interest in joining the Open House activity. Of these, 300 names were drawn under a fair and transparent process. The Open House was organized three times, each time with 100 participants. In addition, PTT focused on corporate governance among companies in the PTT Group to align with their management standards for the Group. The target was to jointly study and develop corporate governance guidelines based on international best practices to establish a corporate governance standard that would be suitable for the PTT Group and used with all subsidiary companies. Moreover, PTT proposed a self-assessment mechanism for each company to rate its corporate governance activities for continuous improvement and as preparation for future ranking. Implementation plans and proactive promotional strategies for corporate governance were also established. Activities undertaken by PTT to support corporate governance within the PTT Group included: 1. Establishing a committee to oversee corporate governance policies for the PTT Group. 2. Organizing seminars to create awareness of corporate governance and social responsibility, with experts as guest speakers, and to encourage experience sharing. The target audience was the staff of PTT and the PTT Group with corporate governance roles. 3. Organizing the PTT CG Group Day to disseminate PTT Group’s corporate governance activities. 4. Sharing comments and ideas within the PTT Group on each company’s corporate governance handbook based on international standards. PTT Public Company Limited
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●
Appointing Directors of Listed Subsidiary Companies
There are over 40 companies under the PTT Group (10 of which are listed companies on SET), and 60% of PTT’s current net income comes from these. To create synergy among the Group, PTT proposed that its directors or executives should be appointed as directors of the Board of subsidiary companies to ensure alignment of policies and business plans and maximize value for all stakeholders. Therefore, there is a good probability that a PTT Director or executive would be appointed to oversee more than five subsidiary companies, exemplified by Mr. Cherdpong Siriwit, Mr. Prasert Bunsumpun, and Mr. Pichai Chunhavajira. PTT’s rationale is as follows: 1. To oversee business management under the policies of the PTT Group and ensure that the business management of companies in PTT Group aligns with PTT’s policies, directions, and standards. 2. To create synergy for the businesses of the PTT Group, thereby resulting in joint benefit and enhancing value for all related organizations and for the country alike. 3. To leverage PTT’s specific experience and competencies to improve business processes among companies in the Group, including the application of financial knowledge to improve accounting and finance processes so that the companies can expand sustainably. In addition, PTT’s knowledge and experience can help companies outside the PTT Group, which will in turn foster good relationships with these companies and strengthen PTT’s network of business allies. 4. This is part and parcel of the roles and responsibilities of Directors and executives.
2. Shareholdersû Rights and Equitability PTT recognizes that investors will put trust and confidence in its business only if they can be assured that PTT has an equitable policy and maintains shareholders’ fundamental rights and equitability under the law, as well as business management that is suitable, efficient, effective, and accepted by investors and stakeholders as one with good corporate governance. As a rule, PTT schedules an annual general shareholders’ meeting (AGM) within four months of the annual closing date of its accounting books. For urgent matters relating to shareholders’ interest or requiring shareholders’ approval under any rules, conditions, or applicable laws, it will call an extraordinary shareholders’ meeting. ●
Shareholders’ Meetings
The Board acknowledges the right of shareholders to receive equal treatment and voice their opinions at meetings. For 2007, PTT has invited minor shareholders to propose items for the AGM and nominate directors ahead of time to promote fair and equitable treatment of all shareholders, which is part of good corporate governance practice. Furthermore, to ensure a clear and transparent process, criteria were established for proposals made by minor shareholders that help them to identify items that are truly beneficial to PTT; select qualified individuals as Directors who would efficiently perform their roles for the best interest of PTT and stakeholders; as well as supports the good corporate governance policy. Meeting notices containing details of the agenda and accompanying documents must therefore be delivered to shareholders at least 14 days ahead of each meeting. This also provides sufficient time for shareholders who cannot attend the meeting to delegate their authority to other individuals or the Independent Directors as allowed by the Ministry of Commerce’s regulations to exercise their voting rights. In addition, to give shareholders enough preparation time, at least three days ahead of the meeting the invitation must be announced through one Thai and one English newspaper for at least three consecutive days. In meetings held in 2006, meeting invitations were made available on PTT’s website at least 30 days ahead of the meeting. PTT ensures that each shareholder can reasonably be assured of meeting security measures and given two hours of available registration time.
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PTT Public Company Limited
At each meeting, PTT exercises equitable treatment of all shareholders. After explaining PTT rules on voting and vote counting for individual agenda item, the chairman of the meeting must address each opinion, question, or recommendation of shareholders, giving adequate time for debate on each agenda item. The chairman ensures that the meeting proceeds according to the order of the agenda and does not add an item without notifying shareholders in advance. For the selection of Directors, individual votes are required, and PTT executives would answer all questions clearly and precisely. The minutes of the meeting must be completely and accurately recorded with a written summary of voting results on each matter. ●
Investor Relations Department
Ever since PTT began trading on SET in 2001, the Capital Market & Investor Relations Department was established as a clearing house for disclosing essential information to investors, which includes financial reports such as performance reports, financial statements, and information reported to SET. Reports on current situations and trends, including the quarterly Management Discussion and Analysis (MD&A) reports, are disclosed to both domestic and international shareholders equitably, regularly, and thoroughly. Investors may contact the Department directly or through the PTT website (www.pttplc.com), which is regularly updated, for information in Thai and English.
3. Stakeholdersû Rights PTT accounts for stakeholders’ rights and interests by establishing guidelines for addressing the needs of each group inside and outside the company, including its customers, shareholders, employees, as well as its own responsibility to society and the environment, as published in PTT’s vision: “PTT strives to be the regional leader with responsibility, equitability, and reasonable dividend to stakeholders under good corporate governance principles”. This is clearly defined in PTT regulations dealing with corporate governance (2001), Section 3 (Code of Conduct for the Board, the Management, and Employees) and in PTT Handbook of Good Corporate Governance (Revision 1/2548), which has been used as a guideline for the Board, executives, and employees in meeting the demands of each group of stakeholders. The details are summarized below: Shareholders
: PTT is committed to being a good representative of all shareholders in operating the business with transparency, taking into account long-term growth in share value and decent returns.
Employees
: PTT considers its employees a key success factor and supports their professional development, attends to the quality of the workplace, and provides fair and proper compensation.
Partners / Counter- : PTT builds good relationships for mutual benefit and strictly observes contractual traders / Suppliers Competitors
agreements made with them. : PTT observes the framework of fair competition and refrains from harming the reputation of business competitors through false accusations.
Creditors
: PTT honors all its obligations to creditors.
Customers
: PTT is committed to satisfying its customers and the public through its products and services, as well as providing confidence in its quality at suitable prices.
Communities
: PTT takes people’s safety, the environment, and the quality of life seriously.
and Societies
PTT maintains active interest in community and social development activities while strictly observing the spirit of laws and regulations.
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4. Shareholdersû Meetings In 2006 PTT organized one shareholders’ meeting: the Annual General Shareholders’ Meeting (AGM) on April 11, 2006. ●
Before the Meeting
PTT publicized the complete meeting notices on its website 30 days before the meeting. More than 14 days ahead of the meetings, meeting notices were mailed along with agenda details, opinions of the Board, complete minutes of the previous meeting, annual report and supplementary meeting information, and a proxy form complete with instructions to each shareholder. In addition, PTT placed such notices in one Thai and one English newspaper for three consecutive days, more than three days ahead of each meeting date. The complete package was sent to each shareholder whose name appeared on the shareholder roster on the closing date. Should shareholders wish to appoint proxies to attend the meeting and vote on their behalf, they may do so under the procedure or delegate Independent Directors as their proxies. ●
Day of the Meeting
PTT values the accommodation provided to shareholders while giving them a sense of security as well as suitably and adequately designating registration locations. Registration begins at least two hours ahead of time and proceeds until the conclusion of the meeting through a barcode system. Meeting keepsakes and suitable reception are extended. During the meeting, the Chairman of the Board serves as chairman by clarifying the quorum, explaining voting and vote-counting procedures, balloting, and clearly disclosing voting results on each agenda item – and allowing shareholders to ask questions or expressing their views in a reasonable and adequate way. The chairman also ensures that Directors or the Management replied to questions with clarity. In 2006, a total of eight Directors attended the AGM – namely the Chairman of the Board, the entire Audit Committee (four individuals), the Chairman of the Corporate Governance Committee, a Corporate Governance Committee member, and the President – together with Senior Management and the external auditor. Two legal advisors served as the moderator in audit and voting matters in cases of disagreements. The Chairman performed his role thoroughly as defined by law and the meetings also gave their unanimous approval on each agenda item. ●
After the Meeting
After the meeting, PTT submitted the report of the shareholders’ meeting, which contained meeting minutes, voting records, and every question raised by shareholders, to SET within the specified time. Meeting information can be accessed through PTT website (www.pttplc.com).
5. Leadership and Vision The Board consists of knowledgeable, capable, and experienced professionals from diverse related fields, which enables PTT to perform efficiently. Clear evidence of the Board’s achievement is the Outstanding Board of State Enterprise Award from the Ministry of Finance in 2006. Based on integrity, business ethics, and compliance with Directors’ code of conduct, the Board exercises its power over business operation under laws, regulations, and resolutions of shareholders’ meetings. It also ensures strict Management performance under PTT’s objectives and guidelines for the maximum benefit to shareholders. The Board defines PTT’s vision, annually reviews and approves directions, strategies, policies, together with financial and operating objectives for the Management’s application in their respective preparation of business as well as other plans and budgets, and follows up on the Management’s implementation of operating plans. It sets assessment criteria and Key Performance Indicators (KPIs) early in the year. Toward year end, it assesses actual performance against the previously set Performance Agreement : PA.
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●
Training of the Board of Directors
The Board and the Management valued participation in development training relevant to their performance. Over 85% of the Directors have undergone the training courses of Thai Institute of Directors Association (IDO) with 9 enrolled in 8 training sessions in 2006 as follows: Director
1. Mr. Chakramon Phasukavanich
2. Dr. Phadhadej Dhamcharee
3. Gen. Somdhat Attanand
4. M.L. Panasarn Hasdin
Training Program
Date of Training
- Directors Certification Program (DCP # 71)
March 1-30, 2006
- Audit Committee Program (ACP # 14)
August 17-18, 2006
- Developing CG # 2
May 18, 2006
- Develop & Implementing a Code of Ethics
August 29, 2006
- Directors Accreditation Program (DAP # 53)
April 28, 2006
- Finance for Non-finance Directors (FN # 29)
June 8, 2006
- Audit Committee Program (ACP # 14)
August 17-18, 2006
- Developing CG # 2
May 18, 2006
- Setting the CEO Performance Plan & Evaluation
June 20, 2006
- Understanding the Fundamental of Financial
August 4, 2006
Statements 5. Dr. Ampon Kittiampon
- Directors Certification Program (DCP # 80)
September 2006
6. Dr. Pornchai Rujiprapa
- Directors Accreditation Program (DAP # 56)
-
7. Mrs. Pannee Sathavarodom
- Directors Certification Program (DCP # 72)
-
8. Mr. Metta Banturngsuk
- Directors Accreditation Program (DAP # 52)
March 21, 2006
- Directors Certification Program (DCP # 79)
September 2006
- Capital Market Academy Leadership Program,
2006
9. Mr. Prasert Bunsumpun
Capital Market Academy
Director who resigned during the year Director
1. Mr. Suparat Kawatkul
Training Program
Date of Training
- Directors Certification Program (DCP # 72)
-
PTT supports Directors’ participation in training programs organized by IOD and other institutions through the year and encourages the Board to visit other agencies to gain experience applicable to PTT’s business. ●
Directors’ Orientation
For new Directors, PTT arranges an orientation program to inform them of its business policies, capital structure, shareholding structure, business performance, information systems, and related laws and regulations. Moreover, each Director receives a Director’s Handbook, which includes the following content:
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Director’s Handbook: 1. The Public Company Act, B.E. 2535 (1992) 2. Guidelines for Directors of Listed Companies 3. Certificate of Company Registration 4. Company Certificate 5. Company Objectives 6. Company Regulations 7. Company Rules (13 Rules) 8. PTT Good Corporate Governance Handbook 9. SEC Handbook for Directors of Listed Companies.
Information: 1. Director Fiduciary Duty Checklist 2. Suggestions on information disclosure for the management of listed companies 3. Connected transactions of listed companies 4. Good corporate governance principles for listed companies in 2006 5. Handbook on understanding and preventing conflicts of interest 6. “PTT Group Moving Forward to HPO” information kit 7. PTT Plc. Company Profile 8. 2005 Sustainable Development Report 9. 2005 Annual Report (Thai Version) in hardcopy and CD 10. “PTT Spirit” monthly magazine issued in 2006.
●
Company Secretary
PTT has appointed Mr. Attapol Rerkphiboon, Vice President of the Office of the President, as Company Secretary to ensure that PTT is managed with the highest efficiency according to the principles of good corporate governance. The Company Secretary is responsible for: – Providing legal and regulatory advice to the Board – Overseeing the Board’s activities – Ensuring efficient implementation of Board resolutions.
6. Conflicts of Interest Under the Board’s policy on conflicts of interest, business decisions made by the Management and employees must be only for PTT’s best interests. They must avoid financial or other relationships with external parties that would result in financial losses for PTT or a conflict in loyalty or interest, and must not compromise the efficiency of business operation. Those with interests or related businesses to a matter requiring PTT’s review and decisions must report their relationship and must not be involved in such decisions, including the approval of such transactions, under the disclosed information relating to a possible conflict of interest with PTT. Any such approval must not contain special conditions or specifications that are out of the ordinary. PTT’s Office of Corporate Audit and the Audit Committee have been entrusted with the monitoring and resolution of issues related to conflicts of interest. To date, however, there has been no such case.
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At each Board meeting, the Chairman reminds the Directors of this policy, asks them to declare a possible conflict of interest on any agenda item(s) relating to them, and asks them to refrain from expressing opinions or voting on such agenda item(s). The Audit Committee regularly presents to the Board its reports on connected transactions and conflicts of interest, which are carefully prepared in line with the regulations of SET, which specify that these issues must be reported and disclosed every quarter and are to be disclosed in the annual report and Form 56-1. All PTT Directors and Management, including their spouses and children under legal age, must report any changes in their Company share ownership to SEC under Section 59 of the Securities and Exchange Act B.E. 2535 (1992) within three days from the date of sale, purchase, disposal, or receipt of such shares. To prevent abuse of inside information, the executives or agencies that are aware of the Company’s inside information may not disclose such information to outsiders or unrelated persons, and may not buy or sell PTT shares within 30 days ahead of the public dissemination of its financial statements.
7. Business Ethics As a mark of its intention to conduct its business with transparency, ethics, responsibility to stakeholders, society, and the environment, PTT has issued a code of conduct for its Board, Management, and all employees to strictly observe together with Company rules and regulations. Section 3 of the Corporate Governance Handbook, entitled “Code of Conduct for Board, Management, and Employees,” is summarized below: 7.1 The Board must properly represent shareholders by ensuring Company growth characterized by sustainability and suitability of returns. They must perform to the best of their ability - with integrity and prudence. They must not be politically motivated and must decide and act independently without any interest in businesses related to or in competition with PTT. They must be committed to the prevention and elimination of all forms of dishonest practices. 7.2 The Management and employees must be committed to developing a team culture, creating customers’ satisfaction, and giving due consideration to equitability and integrity in their conduct of business. They must recognize and be concerned about safety for society, the environment, and the quality of life of the public. They must perform with responsibility, integrity, commitment, and dedication for the benefit of PTT. Along this line, PTT has provided educational media, including articles, radio scripts, and video-scripts illustrating the proper roles of the Board, the Management, and employees to instill discretion and judgment in their decision-making. A simple test is by asking oneself whether a certain decision would lead to an action that is improper or socially unacceptable to the public or detrimental to PTT’s reputation as an ethical company. PTT continues to monitor the implementation of such compliance.
8. Balance of Power for Non-Management Directors The appointment of the Directors rests upon the resolutions of shareholders’ meetings, with input from the Nominating Committee and the Board. As of February 10, 2007, the Board consisted of 15 members: ●
14 were non-management Directors and 9 were Independent Directors, which exceeded 50% of the Board.
●
1 Director was the President.
As a result, the stakeholders were assured that the Directors independently represented the best interests of shareholders and that power was properly balanced.
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9. Combining or Segregating Authority The Chairman and the President are two different persons. The Chairman is not in any way related to the Management. His authority is separate from that of the President, and there is a clear distinction between supervisory policy-making and day-to-day business administrative roles.
10.Board and Management Compensation PTT appointed the Remuneration Committee to oversee the compensation of directors and management. As a rule, the compensation of Directors follows shareholders’ resolutions and approvals. The compensation of Directors and the Management is disclosed under the “Shareholders and Management Structures” section on Director and Management Compensation. (page 88-90)
11.Board of Directors Meetings Board of Directors meetings are planned for the entire year, that is, the final Thursday of each month, with additional meetings called to discuss special agenda items as necessary. The Office of the President issues a meeting notice along with the meeting agenda and relevant supplementary documents to each Director seven days ahead of the meeting. Since April 2004, Board meetings have been made electronic to provide speed and convenience in information access and management, and reducing the amount of accompanying documents. At each meeting, Directors openly and freely expresses their opinions. The minutes of each are properly documented and, after approval from the Board is given, are filed for auditing purposes and reference by Directors and related persons. Each Board meeting lasts 3-4 hours. In 2006, the Board held 12 regular meetings along with two special meetings of Directors as detailed below. Board Meeting Attendance in 2006 Unit : Times
Meeting Type
Name
Board
Audit
Corp.
Nominating
Remune-
(14 times)
Comm.
Governance
Comm.
ration
(10 times)
Comm.
(2 times)
Comm.
(2 times)
Beginning of Term
(1 time)
1. Mr. Cherdpong Siriwit
13/14
-
-
-
-
-
2. Gen. Apichart Penkitti
1/1
-
-
-
-
3. Mr. Chakramon Phasukavanich
12/14
-
-
2/2
-
-
4. Dr. Phathadej Dhamcharee
14/14
10/10
-
-
-
-
5. Gen. Somdhat Attanand
11/11
-
2/2
-
-
April 11, 2006
6. M.L. Panasarn Hasdin
11/11
-
-
-
-
April 11, 2006
7. Dr. Ampon Kittiampon
14/14
-
-
2/2
-
-
8. Dr. Olarn Chaipravat
14/14
10/10
-
-
-
Term ended in April 11, 2006.
November 28, 2006
Reappointed on April 11, 2006. 9. Dr. Suchart Thada-Thamrongvech 10. Dr. Pisanu Sunthraraks
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PTT Public Company Limited
14/14
10/10
-
-
-
-
14/14
-
2/2
-
1/1
-
Unit : Times
Meeting Type
Name
Board
Audit
Corp.
Nominating
Remune-
(14 times)
Comm.
Governance
Comm.
ration
(10 times)
Comm.
(2 times)
Comm.
(2 times)
Beginning of Term
(1 time)
11. Dr. Pornchai Rujiprapa
1/1
-
-
-
-
November 28, 2006
12. Mrs. Puntip Surathin
1/1
-
-
-
-
November 28, 2006
13. Mrs. Pannee Sathavarodom
14/14
-
-
-
1/1
-
14. Mr. Metta Bunturngsuk
14/14
-
-
-
-
-
15. Mr. Prasert Bunsumpun
14/14
-
-
-
-
Term ended in April 2006. Reappointed on April 11, 2006.
Directors who resigned or whose terms ended during 2006 Unit : Times
Meeting Type
Name
Board
Audit
Corp.
Nominating
Remune-
(14 times)
Comm.
Governance
Comm.
ration
(10 times)
Comm.
(2 times)
Comm.
(2 times)
End of Term
(1 time)
16. Mr. Suparat Kawatkul
12/12
-
-
1/1
-
Resigned on November 16, 2006
17. Mr. Prapan Naigowit
9/10
7/7
2/2
-
-
Resigned on September 15, 2006
18. Mr. Somchai Wongsawat
9/12
-
-
-
1/1
Resigned on November 24, 2006
19. Gen. Chaiyasuk Ketudat
3/3
-
-
-
-
Term ended on April 11, 2006
Note: As of February 1, 2007 - Audit Committee consisted of No. 4, 8, 9. - Corporate Governance Committee consisted of No. 5, 9, 10 (No. 9 was appointed to the committee on December 1, 2006). - Nominating Committee consisted of No. 3, 7, 12 (No. 12 was appointed to the committee on December 1, 2006). - Remuneration Committee consisted of No. 7, 10, 13 (No. 7 was appointed to the committee on December 1, 2006).
PTT Public Company Limited
105
12.Committees (or subcommittees) To assist in the screening and efficient supervision of business operation, the Board appointed four committees with expert knowledge, namely the Audit Committee, Nominating Committee, Remuneration Committee, and Corporate Governance Committee. Each consisted of non-management Directors. The composition, scope of authority, and responsibilities of each are detailed under the “Shareholders and Management Structures” section. (page 82-84)
13.Internal Control and Audit The Board monitors Management performance through the approval of the Company’s operating plans, budgets, and goals for each year. The Management is encouraged to recognize the criticality of an internal control system that is efficient, compatible with acceptable risk levels, and suitable for Company circumstances. ●
Internal Control
The Board ensures effective internal control to facilitate risk management to acceptable levels, and regularly monitors and evaluates its efficiency. The Audit Committee examines compliance in all areas, namely: 1. Management Control: Ensuring that relevant units comply with their missions; ensuring that the Management formulates plans to achieve its objectives and goals; and monitoring implementation. 2. Operational Control: Ensuring comprehensive control, for instance, in procurement and hiring through E-procurement and other means, including price bargaining, open contests, and preferred bidding from PTT’s vendor list. 3. Financial Control: Ensuring that PTT applies Result Based Budgeting and SAP (Systems Applications and Products); ensuring adequacy of internal control, for instance, through control environment, suitable risk assessment procedures, control activities, information and communication systems, and proper monitoring and assessment. Internal control plays a key role in helping the Management lower business risks, enhancing business efficiency through proper allocation of resources, and attaining goals. It also protects Company assets from losses and corrupt practices, reinforces the credibility of financial statements, ensures compliance of all personnel with laws and regulations, and protects shareholders’ capital. ●
Internal Audit
The Office of Corporate Audit observes the highest standards of internal audit by examining financial accounts, information technology, safety, health, and environment, including those of affiliates and subsidiaries. The Office audited the annual operating plans, which were consistent with the findings of the corporate risk assessment, and reported them to the Audit Committee every quarter. ●
Risk Management
A Risk Management Committee has been appointed to manage risks for the entire company, assess risks, and define a structure for risk management to reduce risks to acceptable levels. Types of risk generally include financial, operation, business, and event risks. The Committee is responsible for preparing an analysis and assessment of risks, their potential effects on PTT – both internal and external – and a Risk Management Report for the Board. An early warning system is now in place with critical risk indicators defined, for instance, the debt-to-equity ratio is to be under 1. PTT takes risk management seriously. To illustrate, the President has issued a Corporate Risk Management Policy, and the Risk Management Committee has prepared a corporate risk management handbook for all to use as a framework in their assessment and management of risks. To this end, a Risk Management Information System (RMIS) has been developed.
106
PTT Public Company Limited
14.Reports of the Audit Committee Each quarter the Audit Committee reviews PTT’s financial reports in conjunction with the Accounting Department and the Office of the Auditor General, and presents findings to the Board. The Board is accountable for the PTT Group’s consolidated financial statements, as well as other financial information (such as Report on the Board’s Responsibility to Financial Report) presented in the annual report. The financial statements are prepared under generally accepted accounting principles, examined, and certified by the Office of the Auditor General. Essential information, including financial and non-financial information, is completely and consistently disclosed.
15.Investor Relations PTT values accurate, complete, and transparent disclosure of information. This also applies to the release of operating results and Company information to investors, shareholders, and related parties – both directly and indirectly. Since its listing on SET in 2004, PTT has established the Capital Market & Investor Relations Department as the center for quality of assurance of the Company’s financial reporting process, including disclosure of information that affects PTT’s stock price. PTT’s Investor Relations activities are summarized below: Direct
: PTT regularly presented information to analysts, investors, and employees at analysts’ meetings, road
shows, conference calls, and conferences. Analysts, investors, and interested parties also arranged visits to meet the Management of PTT and make inquiries into the Company’s progress. In 2006, these activities took place: - International road shows
9
times
- Domestic road shows
5
times
- Analysts’ meetings
4
times
- Company visits/conference calls
149
times
- E-mails/telephones
3-5
times/day
- Participation in SET excursions
3
times
- Trips for institutional investors to visit plants
1
time
1
time
1
time
1
time
and meet management team members - Trips for minor investors to visit plants and meet management team members
Indirect : Information on the Company, its performance, financial statements, and reports filed with SET are found at www.pttplc.com.
:
Investors and interested parties can also make inquiries through www.pttplc.com or through email at
ir@pttplc.com. Besides, PTT took the public acknowledgement important by publicizing its business activities, project movements, and other activities through several channels, as well as serve the media and the public through corresponding activities. In 2006, these activities could be concluded as follows: - E-mail - Press Release, Photo Release - Press Conference - Press site visits
2,543
pieces
327
pieces
96
times
1
time
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107
RECOGNITIONS
In 2006, PTT won 32 awards and honorable rankings from a total of 15 organizations. Seven organizations accounted for 12 national awards and eight organizations accounted for 20 international awards.
1. N a t i o n a l ( 7 o r g a n i z a t i o n s , 12 a w a r d s ) No.
1.1
Presented by
Boss Magazine
Award / Ranking
Boss of the Year
Date
Criteria
February 27, 2006
-
(Public reform and management) - Mr. Prasert Bunsumpun, President 1.2
Reader’s Digest
Thailand’s Top Brand
February 22, 2006
(Service stations)
●
Trust, quality, value, image, appreciation of consumers’ needs, and innovations
1.3
Stock Exchange
1. Best Corporate Social
July 26, 2006
1. For outstanding listed
of Thailand (SET)
Responsibilities (CSR)
companies who operates
and Finance
Awards
with social responsibilities
& Banking Magazine: SET Awards 2006 (3 awards)
2. Best Investor Relations
2. For outstanding listed
Awards
companies with efficient
3. Distinction in Maintaining
investor relations activities
Excellent Corporate
3. To honor the listed
Governance Report
companies with consistency on good corporate governance (Award to PTT for the 3rd consecutive year)
1.1 108
1.2 PTT Public Company Limited
1.3
No.
1.4
Presented by
Award / Ranking
Tax & Business
Tax Man of the Year 2006
Magazine
(Outstanding company,
Date
Criteria
October 5, 2006
1. Highest growth 2. Support to national
energy group)
economy 3. Corporate governance and business ethics, with means to return some profits to society
1.5
Thailand Manage-
The 5th Thailand Corporate
ment Association
Excellence Awards,
by respondents, along
in conjunction with
ranked 1st
with a follow-up interview
Sasin Graduate
1. Commitment to Social
Institute of Business Administration (2 awards)
September 28, 2006
â—?
Quantitative survey filled
and an in-depth phone
and/or Environmental
interview
Issues
â—?
2. Commitment to Energy
Respondents consisted of 390 senior executives,
Saving
including chairpersons, executive chairpersons, vice chairpersons, presidents/managing directors, directors, managers, or general managers of the top 1,000 companies
1.4
1.5 PTT Public Company Limited
109
No.
1.6
Presented by
Award / Ranking
Date
Criteria
National Corporate
Categorized as one of the nine October 27, 2006
Governance
“excellent” companies, based
listed companies, including
Committee with the
on a survey project on corporate
annual reports, Form 56-1,
support of the Thai
governance among listed
notices to shareholders’
Institute of Directors
companies (2006)
meetings, websites,
●
Disclosed information of
(IOD) Association,
information disseminated
SET, and Office of
through SET and SEC.
the Securities
●
402 listed companies
& Exchange
being rated into six different
Commission (SEC)
levels: 1. Excellent, 90% up, five emblem stamps 2. Very good, 80-89%, four emblem stamps 3. Good, 70-79%, three emblem stamps 4. Satisfactory, 60-69%, two emblem stamps 5. Pass, 50-59%, one emblem stamp 6. Below 50%, no emblem stamp
1.7
Ministry of Finance
Outstanding state enterprise
(3 awards)
in 2006:
November 15, 2006
Efficiency of organization management, with continuous
1. Outstanding Performance
upgrading of operating
2. Outstanding Board of Directors
potential, and commitment
3. Outstanding Social Programs
to social and environmental stewardship
1.6 110
1.7 PTT Public Company Limited
2. I n t e r n a t i o n a l (8 o r g a n i z a t i o n s , 2 0 a w a r d s ) No.
2.1
Presented by
Award / Ranking
Date
April 2006
Criteria
Forbes Global
One of the top 500 listed
Magazine
companies worldwide
performance and financial
(Ranked 372nd in 2006
standing based on revenue,
and 425th in 2005)
income, assets, and market
●
Strong business
capitalization. ●
Ranked from 2,000 major companies worldwide
2.2
FinanceAsia Magazine (5 awards)
1. Best Managed Company
May 2006
●
(2nd consecutive year at No. 1)
Annual survey of leading fund managers, analysts,
2. Best Corporate
and financial professionals
Governance
to identify the best companies
(2nd consecutive year at No. 1)
in five categories in 10 Asian
3. Best Investor Relations
countries: Thailand, China,
(No. 1)
Hong Kong, Philippines, India,
4. Best CFO (No. 1)
Taiwan, Malaysia, Indonesia,
5. Best Commitment
Korea, and Singapore
to Strong Dividend Payments (No. 3) 2.3
Fortune Magazine
One of the 500 largest
July 31, 2006
●
Based on revenue,
companies worldwide
improvement from 373rd
(Fortune Global 500),
last year. Based on net
ranked 265th
income, ranked 193rd. PTT was the sole Thai company on this list.
2.1
2.2
2.3 PTT Public Company Limited
111
No.
2.4
Presented by
Award / Ranking
Date
September 6, 2006
Criteria
Platts News Agency
Top 250 Global Energy
(3 awards)
Company 2006:
1. Asset 2. Revenue
1. Ranked 31st overall
3. Net income
2. Ranked 18th of
4. Return on investment
the energy sector 3. Ranked 5th by region 2.5
Corporate
Recognition Awards 2006,
September 20, 2006
1. Recognition of CG
Governance Asia,
“The BEST of ASIA”
Hong Kong-based
●
No formal ranking
●
Only 4 Thai companies
directly related to the
won the award: PTT,
promotion and improvement
SCC, K-Bank, and AIS
of CG practices over the
performance 2. Participation in activities
past 12 months 2.6
Asiamoney Magazine 1. Asiamoney’s Corporate
December 2006 /
(7 awards)
January 2007
Governance Polls Award
Survey of CEOs, CIOs, and senior executives of
(Large-Cap Corporates
institutional investors and
of the Year, Thailand)
financial institutions in
2. Best Company in Asia for
regions under Asiamoney’s
Corporate Governance,
Corporate Governance
(PTT was ranked 2nd
Polls, involving 313 Asian
best in Asia)
companies except Japan
3. Best for Disclosure and Transparency in Asia, (PTT was ranked 2nd best in Asia)
2.5 112
●
2.6 PTT Public Company Limited
2.7
No.
Presented by
Award / Ranking
Date
4. Best for Shareholders’
Criteria ●
A total of 31 Thai companies
Rights and Equitable
qualified for the corporate
Treatment in Asia,
governance category. nd
(PTT was ranked 2 best in Asia)
5. Best Overall Company in Thailand for Corporate Governance, Thailand 6. Best for Disclosure and Transparency, Thailand 7. Best for Shareholders’ Rights and Equitable Treatment, Thailand 2.7
ICIS Magazine
Global Top 40 Executives
December 2006
Influence on the chemical
in Chemicals by ICIS
business, ranked by
- Mr. Prasert Bunsumpun,
80 ICIS correspondents
No. 28 worldwide 2.8
●
The Wall Street
Asia’s Leading Companies
Journal Asia
Top 10 in Thailand
worldwide. October 2006
Ranked one of the Asia’s 200 most admired companies and rankd the 6th from the 10 most admired companies in Thailand
PTT Public Company Limited
113
Quality, Safety, Health, and Environmental Performance 114
PTT Public Company Limited
QUALITY, SAFETY, HEALTH, AND ENVIRONMENTAL PERFORMANCE As the national energy company, PTT is committed to an ethical way of doing business, meaning business not only for revenue, but also for the control, prevention, and alleviation of potential repercussions on the quality, safety, health, and environment (QSHE) of all stakeholders. These include workplace hazard control, security, environmental stewardship, process improvement and quality control, product development for the environment, and community strengthening. In other words, PTT strives for balanced, sustainable development.
Under such an approach, PTT is committed to further improvement of its QSHE management. In 2006, this resulted in diverse activities catering to all possible stakeholders.
Responsibility to Employees and Contracted Staff Safety in work place and occupational health As occupational health is vital to work efficiency, PTT focused on the prevention and control of potential safety and health losses by its employees. Besides applying MOI/OHSAS 18001 occupational health and safety management to its operating areas, all of which were certified in 2006, PTT stressed proactive actions to prevent and monitor risks through monitoring, measurement of conditions in every operating area, and encouragement of the reporting of near-misses and Substandard Conditions or Acts. PTT involved employees in quality-of-life development efforts in their operating areas through their “Safety, Health, and Environment Committees”, which served as a critical tool for the management and employees to jointly formulate policies, goals, plans, and safety, health, and environmental measures for each area.
Stringently and continuously applied, these have steadily lowered PTT’s Lost Time Incident Frequency Rate (LTIF)* since 1998 down to 0.59 in 2006 against the target of 1.00.
3-Year Average LTIF of Employee
LTIF 3-year (per average 1,000,000 LTIF Hrs)
2.69
0.72 0.56
1998
1999
2000
2001
2002
2003
2004
2005
2006
* Calculating method of LTIF rate is 1 million working hour/1 frequency
PTT Public Company Limited
115
Regular drills for emergency preparedness
Security measures under PTT’s management system
Security Management Recognizing its security risks, PTT has defined systematic measures to counter disasters and sabotage. In 2006, specific measures were drawn up and remedial actions taken to international standards with due regard for the rights of employees, staff, and visitors.
Emergency and Crisis Preparedness This represents a significant element of PTT’s management strategies. Besides the preparation of each area’s plans, it has developed Emergency and Crisis Management Plans to tackle problems and alleviate repercussions at the corporate level. Plans were drilled for various situations in all areas at the corporate level and at other levels where PTT underwent regular drills with government and other agencies.
Responsibility to Related Parties in Supply Chain As a leader in the supply of alternative energy forms for a better environment and an active promoter of research and development of products and technologies for the environment, in 2006 PTT expanded its market of alternative energy to lower petroleum imports and air pollution. Supplies of NGV, gasohol, Bio-Diesel, and palm diesel were expanded to meet customers’ fast-rising demand. Because PTT recognized the criticality of the business relating to gas ranging from the upstream to the petrochemical industry and several downstream industries, in 2006 it participated in a national project on Life - Cycle Inventory Databases, dealing specifically with gas separation processes and gas transmission. This project led to more comprehensive databases on the life-cycles of products in Thailand and supported Thai exports under world trade conditions. During the year, PTT organized seminars and training for distributors and customers apart from conducting safety inspection of tools and equipment in LPG bottling plants, supplier audits, and outsourcing in business process, safety, health, and environmental work with direct bearing on product quality and quality management service. In the meantime, PTT extended support and assistance to emergency rescue efforts.
116
PTT Public Company Limited
Implementation of ISO 14001 environmental management system in all operation units
Responsibility to Communities and Environmental Performance While PTT’s business has brought about the beneficial development to the nation, its activities, operation, products, and services have had some environmental impacts as well as the risk of emergencies and crises which could affect the life quality of people and communities nearby PTT operational areas. PTT therefore paid great attention to the control, prevention, and alleviation of such impacts to the minimum level and applied the ISO 14001 environmental management standard to each operating area, including GSPs, Petroleum Terminals, Gas Transmission Pipeline System, and offices. Every operation unit concentrates on both water and air pollution control strictly complying to the law and the Environmental Impact Assessment (EIA). PTT has installed the standardized waste treatment devices, water and air pollution detectors, as well as the continuous monitor of air quality around PTT operation units. In addition, PTT supported technological research and development of environmental and pollutant management to further improve the efficiency of its operating areas, for instance, energy conservation technologies and an investigation of hazardous waste elimination and treatment concerning gas separation plants. Finally, each year PTT issues a Sustainability Report on business performance, environmental operations, and social responsibility for the information of stakeholders.
PTT NGV service station
Personnel at work at PTT Petroleum Terminal
PTT Public Company Limited
117
TPM assessor from Japan assessing a PTT operation unit
QSHE Achievements of 2006 ●
2005 Thailand Quality Class (TQC) Award, conferred by the National Quality Award Committee Rayong Gas Separation Plant
●
TPM Excellence Award, 1st Category, conferred by Japan Institute of Plant Maintenance (JIPM) Solution Rayong Gas Separation Plant, Khanom Gas Separation Plant, Region 5 Pipeline Operations Division (Ratchaburi)
●
National Outstanding Business Operator in Safety, Occupational Health, and Work Environment Award, conferred by the Ministry of Labour on May 10, during the National Safety Week, to promote standard and compliant practices of management and safety, health, and environment in workplaces 25 sites: Petroleum Terminals – Surat Thani (10 straight years), Lampang (7 straight years), Nakhon Sawan (6 straight years), Khon Kaen, Bangchak, Songkhla Oil Terminals – Phitsanulok (6 straight years), Chiang Mai, Ubon Ratchathani, Udon Thani, Si Racha, Saraburi, Lam Luk Ka, Phra Khanong, Phuket, Pak Phanang LPG Terminals – Khao Bo Ya, Ban Rong Po Gas Separation Plants – Khanom, Nakhon Si Thammarat Region 1 Pipeline Operations Division (Chon Buri) Region 2 Pipeline Operations Division (Ayutthaya) Region 3 Pipeline Operations Division (Rayong) Region 4 Pipeline Operations Division (Khon Kaen) Region 5 Pipeline Operations Division (Ratchaburi) PTT Head Office
●
EIA Monitoring Award, conferred by the Ministry of Natural Resources and Environment, for outstanding compliance with measures stated in environmental impact assessment reports and outstanding environmental management practice Khanom Gas Separation Plant
●
Thailand Energy Award 2006 Outstanding energy administrator (controlled building category) – Mr. Anantchai Khamkasem, Saraburi Oil Terminal
118
PTT Public Company Limited
Presentation of management system certificates
QSHE Management Standard Certification in 2006 ●
ISO/TIS 9001 Certification awarded by MASCI (Management System Certification Institute (Thailand)) One additional category of work (vehicle service)
●
TIS/OHSAS 18001 Certification awarded by MASCI Two additional oil terminals: Phitsanulok and Udon Thani.
ISO/TIS 9001, ISO/TIS 14001 and TIS/OHSAS 18001 Certified Sites % of target sites
100 90 80 70 60 50 40 30 20 10 0
1997
1998
ISO/TIS 9001 (40 target sites)
1999
2000
2001
ISO/TIS 14001 (30 target sites)
2002
2003
2004
2005
2006
ISO/TIS 18001 (26 target sites)
MASCI = The Management System Certification Institute (Thailand) OHSAS = Occupational Health and Safety Advisory Services
PTT Public Company Limited
119
Social and Environmental Responsibility for Sustainabil ity 120
PTT Public Company Limited
SOCIAL AND ENVIRONMENTAL RESPONSIBILITY FOR SUSTAINABILITY
Presentation of fund donation to HRH Princess Maha Chakri Sirindhorn for use by Thai Red Cross.
On the auspicious occasion of the 60th Anniversary Celebrations of His Majesty’s Accession to the Throne, PTT and all Thais have paid their homage to the King by committing to do good deeds and follow His Majesty’s initiatives which have been the models for various projects conducted by various parties nationwide. For the grand occasion, PTT chose to focus on His Majesty’s knowledge dissemination about vetiver together with its applications in a project entitled “Vetiver Grass Cultivation Program to honor HM the King on the auspicious occasion of the Sixtieth Anniversary Celebrations of His Majesty’s Accession to the Throne.” This was intended to disseminate the diverse uses of vetiver, which his people are desired to learn about and implement. PTT aimed to campaign for greater use of this plant in the conservation of soil and water, with a goal of planting at least 5 million saplings. PTT has carried out the program concerning 3 major areas which are: 1. Planting the vetiver in four target regions, namely the 41 PTT operation units and their surrounding communities nationwide. 2. Conducting educational sessions for the public. 3. And launching the 1st Vetiver Glass Cultivation Contest. The contest will be the highlight of the program in promoting the participation of various parties. The contest consists of 3 main categories: vetiver cultivation, promotion, and knowledge dissemination. In conjunction with the Royal Project Foundation, PTT conducted research and promotion of vetiver cultivation to protect soil erosion and for water preservation in watershed areas, high-sloped areas, and agricultural areas of communities, including those in Chiang Mai, Nan, and Kanchanaburi.
“Mountain, Cities, and Ocean, prosper under His Grace”
Vetiver Grass Cultivation Program to honor HM the King on the auspicious occasion of the Sixtieth Anniversary Celebrations of His Majesty’s Accession to the Throne
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121
Royal Flora Exhibition Ratchaphruek 2006
21st PTT Art Contest
Three other national projects launched during the auspicious year consisted of, first, an exhibition of social and environmental work in response to the royal initiatives. This PTT exhibition was a part of the Government’s exhibition to mark the 60th Anniversary Celebrations of His Majesty’s Accession to the Throne. The theme “Mountain, Cities, and Ocean, prosper under His Grace” underlay a special multimedia show accompanying a rafting trip covering 1,000 square meters at Impact Arena exhibition center, Muang Thong Thani in Bangkok. The purpose was to give the public chances to appreciate His Majesty’s ingenuity and immense benevolence for this land and His subjects. On this occasion, in conjunction with the Royal Thai Armed Forces, PTT took part in a grand multimedia display of fireworks near the exhibition site, accompanied by a musical concert of His Majesty’s compositions, performed by the bands from the 3 royal armed forces along with artists from the Grammy Plc. This culminated in a royal homage of large fireworks coupled with a light-and-sound show entitled “Ray of Hope and Loyalty.” Toward the end of the year, PTT took part as a major sponsor of the Royal Flora Exhibition Ratchaphruek 2006 This exhibition was located at the Royal Agricultural Research Center in Mae Hia Sub-District, Chiang Mai Province. Organized under the theme of “Soil, Water, Forest, Human Beings – Garden of Sustainability,” it narrated PTT’s various projects in response to royal initiatives. In the wake of the November 1, 2006, to January 31, 2007, show, the Ministry of Agriculture and Cooperatives modified this area into a humid tropical garden, also sponsored by PTT. Also, during this auspicious year, PTT conducted and hosted several other activities. A good example was the application of the royal initiative on sufficiency economy as an overriding theme for the 21st PTT Art Contest under the title of “Sufficient Economy: A Thai Way of Living.” PTT also joined in the forging of a bell commemorating the 60th Anniversary of His Majesty’s Accession to the Throne, made of gold weighing Baht 609 (9.135 kilograms), to be presented to His Majesty. It sponsored the Tour of Thailand 2006 international long-distance cycling tournament, from
Support to Ray of Hope and Loyalty light-and-sound show
122
PTT Public Company Limited
Contribution to forging of bell commemorating 60th Anniversary of HM the King’s Accession to the Throne
Contribution to project to fight drought
Contribution to foundation for Phra Mongkut Hospital
Chiang Mai Night Safari Zoo to Suvarnabhumi Airport, featuring many contestants from Europe and Asia. Besides, it sponsored an eco-bike project under the Ministry of Natural Resources and Environment in honor of His Majesty while campaigning for public participation in natural resource and environmental conservation activities under the royal initiatives. These bicycles were later presented to schools in barren rural areas. In addition, in 2006 PTT continued its creative activities for the development of communities, society, and the nation to demonstrate its active ongoing commitment to the code of conduct concerning social and environmental responsibility. Below are some examples.
Society and Community In times of natural disasters, PTT is ready to help as well as promotes activities designed for society and communities participation for their improved quality of lives. ●
Around mid-2006, floods inundated the North, prompting PTT to give urgent help in several forms to meet
people’s needs, including donation of fuels to the Supreme Command; funds for fuels and rescue equipment; drinking water to the Public Disaster Relief Center, the Third Army Area, and the Royal Thai Navy; and dry ice, cooking gas, survival kits, and essential food and items through PTT’s operation units as well as other agencies in five northern provinces. Finally, PTT donated survival kits through the Ministry of Energy to forward to community centers in aid of flood victims. ●
Later in the year, the floods from the North ravaged several other provinces in the Central Region, including
some parts of Bangkok. PTT donated fuels and lubricating oil for rescue boats of the “Princess Pa Foundation, Thai Red Cross Society;” and donated survival kits through the Bangkok Metropolitan Administration, the Police Wife Association, and Saw Waw Phaw 91 radio station. In addition, it secured long-tailed fiberglass boats for the Police Wife Association for use in its visits to flood-stricken areas to present relief items. Finally, it donated empty oil drums to Tambon Bang Lane, Administration Organization, Suphan Buri, for use as mobile toilets by flood victims. ●
To help victims of drought, PTT has joined a project entitled “DMR – PEA – PTT – PWA – RTA against
Drought” since 1999. ●
At year-end, PTT organized a “PTT Cold Season Warm-up” caravan to present blankets through the provincial
governors of Lampang, Phrae, Chiang Mai, and Ubon Ratchathani to those suffering from cold weather. Apart from this, PTT employees collected money to buy additional blankets for people of the province of Sara Buri. ●
The “PTT Tune Up Program Helps the Nation Save on Energy” activity offered free public service in its
third year to remind them of the significance of energy saving in all ways possible, focusing on keeping engines in good conditions. Covering the first 15 days of December from 9 a.m. to 5 p.m., the service was available at 100 PTT service stations on all main roads and highways nationwide, particularly in flood-stricken provinces. PTT sponsored the per-diems for student volunteers and provided space in the service stations.
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123
Contribution to launch of Santi Tham 960 Foundation
●
“PTT Tune Up Helps the Nation Save on Energy” Program
In its 10th year, the “Drive Safely with PTT Program,” in conjunction with the Land Transport Department,
focused on instilling a sense of safety, discipline, and awareness in motorists to lower road accidents. PTT also donated traffic cones to police stations throughout the country and joined the Royal Thai Police in providing space in service stations equipped with maps and road tips for 76 provinces as a service to vacationers. ●
Free medical care continued for communities around the gas separation plants in Rayong and mobile clinics
provided medical care and knowledge under the “Sharing with Communities Program.” ●
For the third year, PTT in conjunction with the Community Enterprise Institute expanded community projects
to include 12 provincial community-learning centers and the “Life University Program” implementation in conjunction with Ramkhamhaeng University at bachelor’s and master’s degree levels in Interdisciplinary Study for Local Development, to produce community researchers and strategists. ●
PTT donated to the Population and Community Development Association to further strengthening
community bodies and public participation along the gas pipeline corridors. ●
PTT donated to the “Santi Tham 960 Foundation,” whose aims were to operate a child development center
and run hygienic activities, take care of families of victims of terrorist acts, and promote other activities by an independent committee for justice and liberty in the three southernmost provinces. ●
PTT joined in the Thot Pha Pa Samaggi (Making merits) activity to raise funds for terminally-ill AIDS patients and
for building a hospice for HIV-afflicted children at Wat Phra Bat Nam Phu in Sara Buri.
Environment Besides offering environmentally-friendly products and conducting business to minimize adverse impacts, PTT in conjunction with its community actively joined relevant agencies in environmental programs and activities, including: ●
Forest conservation and rehabilitation, specifically the rehabilitation of mangroves under a royal-initiative
environmental research and development at Laem Phuk Bia, Phetchaburi, located in an area of 1,136 rai (about 454 acres), and rehabilitation of 10,000 rai of forests in Kui Buri, Prachuap Khiri Khan. ●
The West Thong Pha Phum Program, based in Thong Pha Phum District, Kanchanaburi Province, was a joint
undertaking with the Biodiversity Research and Training Program (BRT) to extend research on biological diversity from another program on forest and wildlife conservation in an area of 30,000 rai. The findings would form a body of knowledge on natural resources and local resource management under community participation. PTT also sponsored a community master plan. ●
In conjunction with BRT, PTT conducted Bio-resource management from the coast to the mountain: from
Had Khanom to Kao Nan (Nun Mountain), which was Thailand’s first holistic ecological investigation of biological diversity over a three-year period in the province of Nakhon Si Thammarat. The resulting knowledge would find applications among communities, thereby leading to sustainable conservation and development of biological resources. 124
PTT Public Company Limited
Support to Population and Community Development Association
●
The 8
th
8th Green Globe Award Contest under “A Sufficient Path of Sharing and Bounding Among People, Water, and Forestt” theme
Green Globe Award contest, under the theme “A Sufficient Path of Sharing and Bounding Among
People, Water, and Forest,” honored 38 pieces of environmental conservation work from around the country. PTT staged the contest to promote concrete creative conservation art forms inspired by His Majesty’s initiatives on sufficiency, building on caring and sharing to instill sustainable environmental stewardship.
Education Recognizing the value of education as a pillar of national development, PTT continually supported and promoted various activities in 2006, including: ●
PTT continued with its “One District, One Lab School” program, this year focusing on the upgrading
of personnel for the schools honored by the Ministry of Education last year. ●
PTT presented its 14th school building to Ban Pak Phraek School in Rayong; the 20th Palang Thai, Phuea
Thai library to Wat Pho Nimit School in Surat Thani; and an Energy Classroom to Khon Kaen Phatthana Sueksa School, as decided by the communities around Khon Kaen Petroleum Terminal. All these activities were in compliance with PTT’s policy of providing useful public facilities to rural schools since 1993. ●
PTT presented scholarships and educational materials to schools around its operation units
nationwide, as well as those along the gas pipeline corridors, apart from presenting sports equipment to needy schools of the North and the Northeast. ●
The “5S Schools” program promotes 5S principles for concrete results among youths in schools, organizes
5S contests, and builds network schools. This year it launched a “PTT 5S School Center” at Wat Pho Nimit School in Surat Thani, large-school winner of the 5S contest for the third straight year. ●
PTT regularly launches programs and camps to promote knowledge and instills awareness for energy
conservation in youths so that they may learn correct applications of energy and appreciate energy more. This year the “Generation P Youth Camp,” in its ninth year, saw creative youths with a flair for innovative energy conservation enter the contest. Chosen teams based on their fuel-saving plans at their schools took part in the 2006 edition of the Camp, after which all teams would implement their plans and report their performance for six months as specified by the conditions of the 7th contest on energy conservation. To the most successful and practical planners, PTT would present Khon Kaen University engineering undergraduate scholarships. In its seventh year, the “World of Natural Gas” mobile exhibition program and the “Gassy Camp” program for communities, in its third year, invited youths from visited schools to take part in detailed learning activities about natural gas.
PTT Public Company Limited
125
Presentation of scholarships and educational materials
●
Support to professional tennis tournaments
The Company organized a “PTT Youth Camp for Thai Seas Conservation” and a “Secondary School
Environmental Conservation” program at Khanom Gas Separation Plant, in which teachers and students from Khanom District took part. These activities enabled them to share their experience and learn more about marine resources and environmental conservation along the Khanom coast, thereby instilling awareness for sustainable conservation and development of communities. ●
PTT sponsored engine tune-up tools for Don Mueang Technical College for the benefit of education and
for future public service. ●
In conjunction with the Stock Exchange of Thailand (SET) and Family Knowhow Co., Ltd., PTT
launched the “Money Management Award 2006,” in its second year. This program disseminates knowledge and concepts of financial and investment management to a new generation. ●
To groom Thai youths, PTT sponsored the “Thammasat Undergraduate Business Challenge 2006” contest
at the Faculty of Commerce and Accounting, Thammasat University, where students from 15 leading universities came up with organization management innovations.
Sports This is one area in which PTT has constantly engaged itself to promote the quality of life for youths and the public, promote mental development and refraining from using drugs, and promote healthy well-being – so that they can ultimately serve as quality members of the population. ●
PTT sponsored the National Sports Development Fund by supporting the Football Association of Thailand
and the Lawn Tennis Association of Thailand, both under Royal Patronage, for a total amount of Baht 90 million through three years, to prepare national players and teams and build up their strength – ranging from youth to professional level. ●
PTT was a core sponsor of international tennis tournaments held in Thailand, namely the ATP Thailand
Open 2006 and PTT Thailand Open 2006, including seven youth tennis tournaments: four PTT Junior Championship, two PTT Championship, and one PTT Master Cup tournament (for the second straight year). The purpose was to develop Thai tennis players’ potential and promote professional tennis in Thailand as called for by the national policy. ●
PTT has sponsored an international marathon race in Khon Kaen through the past three years.
●
PTT sponsored a charity golf tournament in support of a foundation for the vocational training center
for underprivileged people in the Eastern Region, in honor of HRH Princess Maha Chakri Sirindhorn. ●
Finally, PTT sponsored the sixth Asian Cadet Wrestling Championship 2006 for amateur wrestlers from more
than 20 Asian countries, which was held at the National Stadium.
126
PTT Public Company Limited
PTT Art Contest for youths from the North and the South
Conservation of Poocha drum-beating tradition
Arts and Cultures Reflecting the national heritage and the soul of a given nation, arts and cultures are the key to civilization. Recognizing their immense value, PTT constantly promotes the development of national arts and cultural conservation. ●
During the year, PTT staged the 21st PTT Art contest in conjunction with Silpakorn University, apart from
a seventh contest with Chiang Mai University and a third with Thaksin University – in a move to reach out to northern and southern youths. ●
In conjunction with the residents of Lampang, PTT preserved the time-honored Poocha drum contest of
Khelang Nakhon (Lampang) by inviting drum masters to teach younger people the correct drum-beating method before they entered the fifth Gong Poocha festival, featuring players from all 13 districts of the province. It also sponsored a Poocha drum conservation youth camp to perpetuate this culture and tradition.
Thanks to PTT’s deep commitment and dedication to improving our society and the people’s quality of life, it has won numerous awards from a variety of parties. In 2006, notable awards included Best Corporate Social Responsibility (CSR) at the SET Awards 2006, and a Commitment to Social and Environmental Issues award for the third straight year at the 5th Thailand Corporate Excellence Awards sponsored by the Thailand Management Association in conjunction with Sasin Graduate Institute of Business Administration of Chulalongkorn University.
PTT Public Company Limited
127
R E P O R T O F B O A R D O F D I R E C T O R Sû R E S P O N S I B I L I T I E S
The financial statements of PTT Public Company Limite’d and its subsidiaries being consolidated have been prepared in compliance with generally accepted accounting principles under the Accounting Act B.E. 2543 (2000) being those Thai Accounting Standards issued under the Accounting Profession Act B.E. 2547 (2004), and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535 (1992). The arrangement of items in the financial statements is in compliance with the notification of the Department of Commercial Registration, dated September 14, B.E. 2544 (2001), “Definition of the abbreviated components required in the financial statements, B.E. 2544 (2001)” under the third paragraph of section 11 of the Accounting Act, B.E. 2543 (2000).
The Company’s Board of Directors are responsible for the integrity and objectivity of the financial statements of PTT Public Company Limited and its subsidiaries in providing reasonable assurance that the financial statements present fairly financial position, results of operation, cash flows, the books and records of the Company accurately reflect all transaction, the Company’s assets are properly safeguarded, including the control systems designed to protect against fraud and irregularity transaction. The financial statements have been prepared with the chosen accounting policy deemed appropriate and applied on the consistency basis in accordance with generally accepted accounting principles, and significant information has been adequately disclosed in note to financial statements, in which the independent auditor express an opinion on the financial statements of PTT Public Company Limited and its subsidiaries in the report of the auditor.
128
(Mr. Cherdpong Siriwit)
(Mr. Prasert Bunsumpun)
Chairman of the Board
President
PTT Public Company Limited
A U D I T O RûS R E P O R T
T O : T H E SH A R E H O L D E R S O F P T T P U B L I C C O M P A N Y L I M I T E D The Office of the Auditor General of Thailand has audited the accompanying consolidated balance sheets of PTT Public Company Limited and its subsidiaries and the balance sheets of PTT Public Company Limited as of December 31, 2006 and 2005, and the related consolidated and the Company’s statements of income, changes in shareholders’ equity, and cash flows for the years then ended. 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 subsidiaries abroad, subsidiaries arising from joint investments between PTT Public Company Limited and subsidiaries or others, joint ventures which are joint investments between PTT Public Company Limited and others and joint investments between subsidiaries and others 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. The assets and liabilities of the above subsidiaries and joint ventures included in the consolidated financial statements as of December 31, 2006 constitute 15.42% and 7.46% and as of December 31, 2005 constitute 17.94% and 10.35%, 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The audits include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. The audits also include assessing the accounting principles used and significant estimates made by the 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 mentioned above provide a reasonable basis for the opinion. In the opinion of the Office of the Auditor General of Thailand based on the audits and the 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 Public Company Limited and its subsidiaries and of PTT Public Company Limited as of December 31, 2006 and 2005, the results of operations, the changes in shareholders’ equity and the cash flows for the years then ended in accordance with generally accepted accounting principles.
(Khunying Jaruvan Maintaka)
(Jintana Vanichkajorn)
Auditor General
Director of Audit Office
Office of the Auditor General February 23, 2007
PTT Public Company Limited
129
BALANCE SHEETS P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I AR I E S AS O F D E C E M B E R 3 1 , 2 0 0 6 AN D 2 0 0 5
Consolidated Unit : Baht
2005
The Company
Notes
2006
2006
2005
Cash and cash equivalents
3
86,806,254,165
73,440,815,749
26,509,729,979
20,884,465,980
Current investments
4
1,412,953,182
714,861,036
971,412,527
95,671,636
5
83,651,051,094
67,518,695,403
70,714,206,129
55,618,297,002
6.1
32,233,254,372
21,798,865,096
41,076,883,986
40,199,888,113
6.2
1,485,781,424
5,186,428,630
2,595,264,377
17,510,054,024
Inventories
7
15,117,531,539
23,501,308,669
7,957,413,082
9,176,116,543
Materials and supplies - net
8
7,552,469,189
5,532,864,605
1,683,222,426
1,563,510,309
Other current assets
9
25,170,367,460
24,320,164,659
16,855,527,953
18,385,858,758
253,429,662,425
222,014,003,847
168,363,660,459
163,433,862,365
100,232,967,812
66,577,148,716
229,929,117,290
170,591,164,633
11.3
3,129,323,736
2,089,316,392
1,894,120,000
1,799,078,000
6.3
5,807,690,627
5,992,867,629
6,048,767,974
6,019,375,915
Property, plant and equipment - net
12
337,131,879,529
305,378,114,996
140,582,771,063
109,948,850,665
Intangible assets
13
22,596,923,648
11,528,865,309
3,665,779,723
3,175,955,018
Deferred tax assets
14
1,251,768,536
1,898,455,921
1,219,733,054
1,184,784,823
Advance payment for gas purchased
15
16,598,177,518
19,746,624,624
20,629,669,029
24,574,666,637
Other non-current assets
16
11,275,075,385
14,581,259,662
9,253,938,789
8,487,176,043
498,023,806,791
427,792,653,249
413,223,896,922
325,781,051,734
751,453,469,216
649,806,657,096
581,587,557,381
489,214,914,099
Assets
Current Assets
Trade accounts and notes receivable - others, net Trade accounts receivable - related parties, net Other accounts receivable, advances and short-term loans - related parties, net
Total Current Assets Non-current Assets Investments accounted for under the equity method Other long-term investments
2.25, 10.3
Advances and long-term loans - related parties, net
Total Non-current Assets Total Assets
Notes to financial statements form an integral part of these financial statements.
130
PTT Public Company Limited
B A L A N C E S H E E T S (Continued) P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I A R I E S AS O F D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
Consolidated Unit : Baht
Notes
2006
The Company
2005
2006
2005
Liabilities and Shareholders’ Equity
Current Liabilities Bank overdrafts and short-term loans from financial institutions
17
1,734,797,602
3,546,735,675
-
998,410,421
55,620,487,671
49,488,015,557
52,855,101,757
43,920,826,386
6.4
29,168,043,894
18,626,632,656
37,504,382,815
31,722,141,934
6.5
513,089,157
334,643,566
372,626,899
158,136,236
19
21,612,145,139
21,626,740,361
11,493,033,200
8,484,501,371
Income tax payable
21,161,422,580
20,935,268,286
3,868,862,856
3,997,999,648
Accrued expenses
25,251,959,602
21,437,007,568
10,055,120,041
9,084,274,666
12,513,974,983
12,016,282,093
6,357,907,951
6,570,473,569
167,575,920,628
148,011,325,762
122,507,035,519
104,936,764,231
6.6
-
-
248,950,289
360,812,624
19
198,339,307,089
197,983,341,348
165,066,437,701
146,743,072,536
-
-
22,866,362
1,074,727,910
Trade accounts payable - others Trade accounts payable - related parties Other accounts payables - related parties Current portion of long-term loans
Other current liabilities
18
Total Current Liabilities Non-current Liabilities Other long-term accounts payable - related parties Long-term loans Allowance for share of net loss over investments
2.25, 10.3, 10.5
Deferred tax liabilities
14
13,839,224,531
12,685,241,571
158,750,000
276,996,795
Provision for decommissioning costs
20
10,712,387,696
7,019,362,087
-
-
4,347,905,533
3,986,404,813
4,347,905,533
3,986,404,813
2,316,360,846
1,688,048,445
1,403,432,022
1,019,332,886
229,555,185,695
223,362,398,264
171,248,341,907
153,461,347,564
397,131,106,323
371,373,724,026
293,755,377,426
258,398,111,795
Deposits on LPG cylinders Other non-current liabilities Total Non-current Liabilities Total Liabilities
21
Notes to financial statements form an integral part of these financial statements.
PTT Public Company Limited
131
B A L A N C E S H E E T S (Continued) P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I AR I E S AS O F D E C E M B E R 3 1 , 2 0 0 6 AN D 2 0 0 5
Consolidated Unit : Baht
Notes
2006
The Company
2005
2006
2005
Liabilities and Shareholders’ Equity (Continued)
Shareholders’ Equity Share capital
22
Authorized share capital 2,857,245,725 ordinary shares of Baht 10 each
28,572,457,250
-
28,572,457,250
-
2,837,245,725 ordinary shares of Baht 10 each
-
28,372,457,250
-
28,372,457,250
2,804,925,625 ordinary shares of Baht 10 each
28,049,256,250
-
28,049,256,250
-
2,797,245,725 ordinary shares of Baht 10 each
-
27,972,457,250
-
27,972,457,250
19,321,453,366
17,992,830,666
19,321,453,366
17,992,830,666
2,950,404,482
2,142,400,359
2,950,404,482
2,142,400,359
463,391,320
830,990,386
463,391,320
830,990,386
(994,247,170)
(800,719,785)
(994,247,170)
(800,719,785)
Issued and paid-up share capital
Premium on share capital Premium on ordinary shares Surplus on dilution of investments in subsidiaries and associates Unrealized gain on available-for-sale securities Currency translation differences Retained earnings Appropriated Legal reserve
23.1
2,857,245,725
2,850,000,000
2,857,245,725
2,850,000,000
Reserve for Self-insurance Fund
23.2
888,116,510
841,395,380
888,116,510
841,395,380
234,296,559,472
178,987,448,048
234,296,559,472
178,987,448,048
287,832,179,955
230,816,802,304
287,832,179,955
230,816,802,304
66,490,182,938
47,616,130,766
-
-
Total Shareholders’ Equity
354,322,362,893
278,432,933,070
287,832,179,955
230,816,802,304
Total Liabilities and Shareholders’ Equity
751,453,469,216
649,806,657,096
581,587,557,381
489,214,914,099
Unappropriated Total parent’s shareholders’ equity Minority interests
2.25
(Prasert Bunsumpun)
(Pichai Chunhavajira)
President
Senior Executive Vice President, Corporate Finance & Accounting
Notes to financial statements form an integral part of these financial statements.
132
PTT Public Company Limited
STATEMENTS OF INCOME P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I A R I E S F O R T H E Y E AR S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
Consolidated Unit : Baht
Sales and services
Notes
25
Cost of sales and services Gross Margin Selling and administrative expenses Exploration expenses Income from Sales
2006
The Company
2005
2006
2005
1,213,985,278,960
926,269,340,679
1,187,032,285,998
967,099,813,759
1,072,215,730,831
811,088,811,955
1,132,575,559,668
915,357,684,468
141,769,548,129
115,180,528,724
54,456,726,330
51,742,129,291
28,667,616,816
21,343,732,172
21,883,286,151
16,629,303,294
3,631,646,309
1,213,024,874
-
-
109,470,285,004
92,623,771,678
32,573,440,179
35,112,825,997
7,130,480,089
-
Gain on disposal of invesments
35
7,130,480,089
Other income
26
25,221,723,112
9,435,673,595
18,967,526,808
12,745,029,541
Directors’ remuneration
6.8
160,588,765
79,752,401
40,330,089
28,485,010
141,661,899,440
101,428,254,059
58,631,116,987
47,829,370,528
19,139,447,260
21,651,259,802
52,537,611,460
52,984,437,048
160,801,346,700
123,079,513,861
111,168,728,447
100,813,807,576
Income from Operations
(551,438,813)
Share of net income from investments under the equity method
27
Income before Interests and Taxes Interest expenses
30
11,005,620,452
8,811,662,806
7,320,022,397
6,787,342,468
Income taxes
14
35,882,714,128
25,565,615,689
8,588,102,690
8,505,172,406
113,913,012,120
88,702,235,366
95,260,603,360
85,521,292,702
18,652,408,760
8,597,739,206
-
-
95,260,603,360
80,104,496,160
95,260,603,360
85,521,292,702
-
5,416,796,542
-
-
95,260,603,360
85,521,292,702
95,260,603,360
85,521,292,702
34.02
28.63
34.02
30.57
-
1.94
-
-
34.02
30.57
34.02
30.57
33.90
28.59
33.90
30.53
-
1.94
-
-
33.90
30.53
33.90
30.53
Income after Taxes Income of minority interests Income from Ordinary Activities Extraordinary items Net Income Basic earnings per share
28 2.25 24
Income before extraordinary items Extraordinary items Net income Diluted earnings per share
24
Income before extraordinary items Extraordinary items Net income
2.25
Notes to financial statements form an integral part of these financial statements.
PTT Public Company Limited
133
134
PTT Public Company Limited
Notes
-
-
19,321,453,366
-
-
28,049,256,250
-
-
-
-
-
-
-
-
-
-
-
-
1,328,622,700
-
-
-
-
-
-
-
17,992,830,666
-
-
76,799,000
-
27,972,457,250
17,992,830,666
-
share capital
Premium on
27,972,457,250
share capital
Issued and paid-up
Notes to financial statements form an integral part of these financial statements.
Balance as of December 31, 2006
Balance as of Decemberr 31, 2005 Issued and paid-up share capital Premium on share capital Currency translation differences Unrealized loss on available-for-sale securities Minority interests Surplus on dilution of investments in subsidiaries and associates 10.7 Legal reserve 23.1 Reserve for Self-insurance Fund 23.2 Dividends paid Net income
Balance as of January 1, 2005 Currency translation differences Unrealized loss on available-for-sale securities Minority interests Surplus on dilution of investments in subsidiaries and associates Reserve for Self-insurance Fund 23.2 Dividends paid Net income
Unit : Baht
CONSOLIDATED
F O R T H E Y E AR S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
P T T P U B L I C C O M PAN Y L I M I T E D AN D S U B S I D I AR I E S
2,950,404,482
-
-
-
-
808,004,123
-
-
-
-
-
2,142,400,359
-
-
-
53,116,107
-
-
-
2,089,284,252
investments
dilution of
Surplus on
463,391,320
-
-
-
-
-
-
(367,599,066)
-
-
-
830,990,386
-
-
-
-
-
(215,376,795)
-
1,046,367,181
for-sale securities
(loss) on available-
Unrealized gain
(994,247,170)
-
-
-
-
-
-
-
(193,527,385)
-
-
(800,719,785)
-
-
-
-
-
-
(35,008,043)
(765,711,742)
differences
translation
Currency
2,857,245,725
-
-
-
7,245,725
-
-
-
-
-
-
2,850,000,000
-
-
-
-
-
-
-
2,850,000,000
reserve
Legal
S T A T E M E N T S OF C H A N G E S I N S H A R E H O L D E R S 没 E Q U I T Y
85,521,292,702
(18,881,408,644)
(29,565,051)
-
-
-
-
112,377,129,041
95,260,603,360
(39,897,525,081)
(46,721,130)
(7,245,725)
-
-
-
-
-
-
888,116,510 234,296,559,472
-
-
46,721,130
-
-
-
-
-
-
-
841,395,380 178,987,448,048
-
-
29,565,051
-
-
-
-
811,830,329
insurance Fund Unappropriated
Reserve for Self-
Retained earnings
66,490,182,938
-
-
-
-
-
18,874,052,172
-
-
-
-
47,616,130,766
-
-
-
-
27,075,354,582
-
-
20,540,776,184
interests
Minority
354,322,362,893
95,260,603,360
(39,897,525,081)
-
-
808,004,123
18,874,052,172
(367,599,066)
(193,527,385)
1,328,622,700
76,799,000
278,432,933,070
85,521,292,702
(18,881,408,644)
-
53,116,107
27,075,354,582
(215,376,795)
(35,008,043)
184,914,963,161
Total
PTT Public Company Limited
135
Notes
2.25
Premium on
28,049,256,250
19,321,453,366
-
17,992,830,666 1,328,622,700 -
-
-
27,972,457,250 76,799,000 -
17,992,830,666 -
share capital
27,972,457,250 -
share capital
Issued and paid-up
Notes to financial statements form an integral part of these financial statements.
Balance as of December 31, 2006
Balance as of Decemberr 31, 2005 Issued and paid-up share capital Premium on share capital Currency translation differences Unrealized loss on available-for-sale securities Surplus on dilution of investments in subsidiaries and associates 10.7 Legal reserve 23.1 Reserve for Self-insurance Fund 23.2 Dividends paid Net income
Balance as of January 1, 2005 Currency translation differences Unrealized loss on available-for-sale securities Surplus on dilution of investments in subsidiaries and associates Reserve for Self-insurance Fund 23.2 Dividends paid Net income
Unit : Baht
THE COMPANY
F O R T H E Y E AR S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
P T T P U B L I C C O M PA N Y L I M I T E D AN D S U B S I D I A R I E S
2,950,404,482
808,004,123 -
2,142,400,359 -
53,116,107 -
2,089,284,252 -
investments
dilution of
Surplus on
463,391,320
-
830,990,386 (367,599,066)
-
1,046,367,181 (215,376,795)
for-sale securities
(loss) on available-
Unrealized gain
(994,247,170)
-
(800,719,785) (193,527,385) -
-
(765,711,742) (35,008,043) -
differences
translation
Currency Legal
2,857,245,725
7,245,725 -
2,850,000,000 -
-
2,850,000,000 -
reserve
(29,565,051) (18,881,408,644) 85,521,292,702
112,377,129,041 -
Unappropriated
(7,245,725) (46,721,130) (39,897,525,081) 95,260,603,360 888,116,510 234,296,559,472
46,721,130 -
841,395,380 178,987,448,048 -
29,565,051 -
811,830,329 -
insurance Fund
Reserve for Self-
Retained earnings
S T A T E M E N T S OF C H A N G E S I N S H A R E H O L D E R S 没 E Q U I T Y ( C o n t i n u e d )
287,832,179,955
808,004,123 (39,897,525,081) 95,260,603,360
230,816,802,304 76,799,000 1,328,622,700 (193,527,385) (367,599,066)
53,116,107 (18,881,408,644) 85,521,292,702
164,374,186,977 (35,008,043) (215,376,795)
Total
STATEMENTS OF CASH FLOWS P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I AR I E S F O R T H E Y EA R S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
Consolidated Unit : Baht
2006
The Company
2005
2006
2005
Cash Flows from Operating Activities Net income
95,260,603,360
85,521,292,702
95,260,603,360
85,521,292,702
26,755,020,578
17,478,594,420
6,642,896,508
6,619,605,938
Adjustment of net income to net cash provided by (used in) operating activities: Depreciation, depletion and amortization (Reversal of) loss on impairment of assets (Gain) loss on disposal of assets (Gain) loss on disposal of investments Write-off fixed assets adjustment
1,059,150,514
(326,168,952)
1,059,150,514
(282,405,380)
182,611,030
(54,121,816)
113,546,614
(16,057,805)
(7,130,480,089)
551,438,813
(7,130,480,089)
-
(8,038,321)
(4,916,178)
(8,619,940)
(4,916,178)
(19,139,447,260)
(21,651,259,802)
(52,537,611,460)
(52,984,437,048)
Income of minority interests
18,652,408,760
8,597,739,206
-
-
(Gain) loss on foreign exchange
(9,548,860,892)
2,102,330,401
(4,722,995,737)
606,542,664
(578,784)
-
-
(57,733,263)
124,916,188
Share of net income from investments under the equity method
Unrealized gain on changes in value of investments Doubtful accounts Amortization of exploration costs Amortization of bond issue expenses Amortization of bond discounts Deferred income taxes
(2,102,695) 141,026,098
(62,589,990)
1,701,860,553
415,689,464
-
-
8,140,262
9,575,521
-
-
34,411,113 1,860,964,005
24,336,136
27,015,838
23,227,287
(282,264,349)
(34,948,231)
412,395,246
Amortization of deferred interest from finance leases
34,588,207
6,650,074
20,914,068
6,203,909
54,454,045
33,583,761
54,406,664
33,583,761
4,637,690
17,123,860
4,637,690
-
(40,300,000)
(65,100,000)
Provision for adjustment in value of inventories Allowance for obsolete materials and supplies Dividends received Allowance for loss on lawsuits Extraordinary items Others
(493,122,953)
(40,300,000)
206,950,232
-
206,950,232
-
-
(7,738,280,775)
-
-
6,017,441
6,581,434
1,091,066
109,640,791,678
84,609,311,873
39,016,373,285
(4,868)
Net income from operating activities before changes in operating assets and liabilities
Notes to financial statements form an integral part of these financial statements.
136
PTT Public Company Limited
39,832,140,238
S T A T E M E N T S O F C A S H F L O W S (Continued) P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I A R I E S F O R T H E Y E AR S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
Consolidated Unit : Baht
2006
The Company
2005
2006
2005
Changes in operating assets (increase) decrease Trade accounts and notes receivable - others
(17,149,631,808)
(19,270,730,408)
(15,236,200,602)
(16,467,730,681)
Trade accounts receivable - related parties
(24,607,888,365)
(2,948,901,721)
(2,468,576,687)
(21,314,550,000)
Other accounts receivable, advances and short-term loans to related parties Inventories
(927,586,300)
553,026,962
(839,133,243)
(743,111,295)
(10,382,776,231)
Materials and supplies
(2,026,539,898)
(1,622,857,988)
Other current assets
(2,054,721,297)
(2,894,920,452)
1,579,728,423
(3,136,859,056)
3,148,447,107
2,998,896,929
3,944,997,609
3,702,109,349
-
-
430,939
430,939
Advance payment for gas purchased Long-term advances to related parties Other non-current assets
(971,446,994)
(4,454,580,418)
1,149,181,710
1,087,446,044
(97,895,132)
(767,323,168)
(4,661,044,137) (477,509,483)
(3,039,286,966)
Changes in operating liabilities increase (decrease) Trade accounts payable - others
6,263,987,621
24,226,250,750
8,948,369,951
21,064,108,637
Trade accounts payable - related parties
27,582,300,900
803,629,345
5,794,809,613
13,704,873,536
Other accounts payable - related parties
1,200,304,662
(158,806,869)
213,802,942
13,902,578
Income tax payable
1,900,492,900
7,703,626,991
Accrued expenses
3,518,549,041
7,336,380,227
Other current liabilities Deposits on LPG cylinders
(742,609,035)
3,033,224,907
361,500,720
275,315,081
-
-
(129,136,792) 9,474,217 (446,415,796)
1,322,094,209 469,669,596 2,254,030,120
361,500,720
275,315,081
(111,862,335)
346,247,115
Other long-term accounts payable - related parties Deferred income taxes Other non-current liabilities
(433,683,755)
2,121,378,295
511,648,523
(2,073,721,193)
(5,169,987,273) Net cash provided by operating activities
104,470,804,405
-
-
174,612,983
(1,944,704,911)
5,244,434,207
2,080,365,352
(6,801,458,030)
89,853,746,080
41,096,738,637
33,030,682,208
Notes to financial statements form an integral part of these financial statements.
PTT Public Company Limited
137
S T A T E M E N T S O F C A S H F L O W S (Continued) P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I AR I E S F O R T H E Y EA R S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
Consolidated Unit : Baht
2006
The Company
2005
2006
2005
Cash Flows from Investing Activities Proceeds from disposal of property, plant and equipment Payment for property, plant and equipment Payment for intangible assets Long-term loans to related parties Short-term loans to others Short-term loans to related parties Payment for investments in subsidiaries
109,915,660
24,167,971
134,964,571
19,458,581
(88,134,108,429)
(86,012,339,109)
(36,075,981,287)
(37,106,964,863)
(1,056,096,179)
(732,410,918)
(261,631,981)
(288,520,582)
-
(145,648,774)
(215,000,000)
(170,648,774)
(151,104,812) -
(3,212,559,000)
-
-
(302,209,625)
(47,467,809,000)
(884,236,333)
7,084,253,455
(22,511,205,137)
(7,769,484,648)
Payment for investments in joint ventures
(6,185,792,539)
-
(10,053,620,565)
(148,995,000)
Payment for investments in associates
(3,982,001,595)
(23,982,250,884)
(3,954,862,522)
(26,195,881,564)
(87,750,000)
-
(87,750,000)
-
(886,048,691)
-
(585,600,000)
-
Payment for general investments Payment for avalible-for-sale securities Proceeds from disposal of long-term investments
13,756,244,111
8,909,861,560
19,200,638,325
784,050
185,177,003
-
185,177,003
-
-
599,901,700
-
599,901,700
3,487,144,556
1,388,989,356
15,487,394,556
34,243,891,056
10,546,406
26,819,681
10,546,406
26,819,681
Cash received from repayment of long-term loans to related parties Cash received from repayment of short-term loans Cash received from repayment of short-term loans to related parties Cash received from cancellation of leasehold in gas stations Current investments (increase) decrease Dividends received Net cash used in investing activities
(687,810,044)
PTT Public Company Limited
(867,561,484)
46,550,418,233
7,168,344,098
5,530,800,889
18,016,978,870
12,075,685,689
(77,337,576,788)
(39,028,544,427)
(21,879,722,870)
(25,631,345,441)
Notes to financial statements form an integral part of these financial statements.
138
51,491,869,646
S T A T E M E N T S O F C A S H F L O W S (Continued) P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I A R I E S F O R T H E Y E AR S E N D E D D E C E M B E R 3 1 , 2 0 0 6 A N D 2 0 0 5
Consolidated Unit : Baht
Notes
2006
The Company
2005
2006
2005
Cash Flows from Financing Activities Cash received from the issue of ordinary shares
2,653,039,053
955,941,500
76,799,000
-
Cash received from premium on share capital
8,663,558,328
-
1,328,622,700
-
Cash received from long-term loans
36,749,412,300
27,016,641,140
18,429,533,600
8,158,000,000
Cash received from the issue of bonds
16,000,000,000
30,183,580,318
16,000,000,000
30,183,580,318
450,962,550
-
-
-
-
12,745,891,210
-
12,745,891,210
Cash received from short-term loans Cash received from the issue of notes payable Repayment of long-term loans
(9,958,713,993)
(45,404,672,760)
(3,388,547,068)
(413,957,637)
Repayment of notes payable
(1,000,000,000)
(11,900,276,079)
(1,000,000,000)
(11,761,000,000)
(12,492,062,602)
-
-
-
(5,000,000,000)
(7,530,000,000)
(5,000,000,000)
(7,530,000,000)
-
(12,470,855,218)
-
(11,602,418,968)
Redemption of debentures Redemption of government bonds Repayment of short-term loans Repayment of liabilities from finance leases
(161,760,725)
(39,910,001)
(407,106,957)
348,325,254
(92,865,222)
(35,822,202)
Bank overdrafts and short-term loans from financial institutions increase (decrease) Dividends paid
-
(18,881,408,644)
(48,683,543,740)
(22,304,216,814)
(39,897,525,081)
(13,186,215,786)
(28,399,551,450)
(13,543,982,071)
862,864,077
(668,165,980)
(15,612,095)
(47,769,697)
643,542
86,592,565
(206,490,653)
Net cash provided by (used in) financing activities Effects of exchange rates on cash and cash equivalents Currency translation differences
-
-
Net increase in cash and cash equivalents
13,365,438,416
22,203,547,455
5,625,263,999
8,262,844,386
Cash and cash equivalents at beginning of periods
73,440,815,749
51,237,268,294
20,884,465,980
12,621,621,594
Cash and cash equivalents at end of periods 3
86,806,254,165
73,440,815,749
26,509,729,979
20,884,465,980
Interest expenses
12,613,672,055
11,822,261,106
8,816,724,768
7,539,094,393
Income taxes
31,767,885,193
21,925,344,756
7,734,934,722
6,090,209,436
Supplemental disclosure of cash flow information Cash paid during the periods for
Notes to financial statements form an integral part of these financial statements.
PTT Public Company Limited
139
NOTES TO THE FINANCIAL STATEMENTS P T T P U B L I C C O M P AN Y L I M I T E D AN D S U B S I D I AR I E S F O R T H E Y EA R S E N D E D D E C E M B E R 3 1 , 2006 A N D 2 0 0 5
1.
General Information PTT Public Company Limited (“the Company”) has been incorporated as a public limited company, and listed on the Stock Exchange of Thailand. The address of its incorporated and registered office is as follows: The Head Office of the Company is located at 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok, Thailand. The Company’s principal activity is the operation of petroleum business. The Company has invested in subsidiaries, associates and joint ventures (“the Group”), which conduct petroleum exploration and production, natural gas, refining, oil marketing and international trading, petrochemicals and other related business as discussed in Note 31 “Segment Information”. As of December 31, 2006 and 2005, the Group operated in 13 countries and employed 8,553 people (2005: 7,843 people). The staff costs of the Group for the year ended December 31, 2006 are Baht 9,626.18 million (2005: Baht 6,647.02 million).
2.
Accounting Policies The significant accounting policies adopted in the preparation of these consolidated and the Company’s financial statements are set out below.
2.1 Basis for Preparation of Financial 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 issued under the Accounting Profession Act B.E. 2547 (2004), and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535 (1992). The arrangement of items in the financial statements is in compliance with the notification of the Department of Commercial Registration, dated September 14, B.E. 2544 (2001), “Definition of the abbreviated components required in the financial statements, B.E. 2544 (2001)” under the third paragraph of section 11 of the Accounting Act, B.E. 2543 (2000). The consolidated and the Company’s financial statements have been prepared based on the assumption that users of the financial statements have understanding of Thai generally accepted accounting principles and practices in Thailand. Consequently, the accounting principles applied may differ from generally accepted accounting principles adopted in other countries. The accompanying consolidated and the Company’s financial statements are, therefore, not intended to present financial position, operating results and cash flows in accordance with generally accepted accounting principles adopted in other countries. The consolidated and the Company’s financial statements have been prepared under the historical cost convention in the valuation of components in the financial statements with the exception of certain amounts, which are accounted for under the fair value method as disclosed in the accounting policies. For the convenience of users, an English version of the consolidated and the Company’s financial statements has been prepared from the statutory financial statements that were issued in Thai language.
140
PTT Public Company Limited
During 2006, the Company changed its investment structures in subsidiaries, associates and joint ventures which have effects on the preparation of the consolidated and the Company’s financial statements. Details are as follows: The Company sold its entire investments in the ordinary shares of PTT Polyethylene Co., Ltd. and Bangkok Polyethylene Public Co., Ltd. which were 50% equally owned by the Company, to PTT Chemical Public Co., Ltd. The Company initially included the subsidiaries: PTT ICT Solutions Co., Ltd. and PTT Polymer Logistics Co., Ltd., in the consolidated financial statements. The Company initially included the joint ventures: PTT Asahi Chemicals Co., Ltd. and HMC Polymers Co., Ltd., in the consolidated financial statements. The Company acquired an investment in additional ordinary shares of Bangchak Petroleum Public Co., Ltd. (BCP). Consequently, the Company’s shareholding in BCP increased from 7.60% to 29.75%, and BCP’s status changed from a related company to an associate. The Company disposed of its ordinary shares in Rayong Refinery Public Co., Ltd. (RRC) Consequently, the Company’s shareholding in RRC decreased from 100% to 48.75%, and RRC’s status changed from a subsidiary to an associate.
2.2 Use of Estimates The preparation of the financial statements in conformity with Thai generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities together with the disclosure of contingent assets and liabilities at the dates of the financial statements. Actual results may differ from those estimates.
2.3 Investments in Subsidiaries Subsidiaries are entities over which the parent company of the Group has the power to control their financial and operating policies. The subsidiaries are included in the consolidated financial statements. Attention is directed more to the substance of the control than to the legal form. The Group includes subsidiaries in the consolidated financial statements from the dates on which the parent company gains control over the subsidiaries, and no longer includes them from the dates on which the control ceases. The Group uses the purchase method of accounting to account for the acquisition of subsidiaries. The acquisition costs are measured as the fair value of the compensation provided by the Group plus the costs directly attributable to the acquisition. The excess of the acquisition costs over the fair value of the Group’s share of identifiable assets and liabilities of the subsidiaries acquired is recorded as goodwill. The accounting policy with respect to goodwill is discussed in Note 2.15. Inter-company transactions, balances and unrealized gains or losses on transactions among companies in the Group are fully eliminated except for unrealized losses which will not be recovered by the Group in the future. If necessary, the accounting policies of subsidiaries have been changed to ensure consistency with the accounting policies adopted by the Group. Separate disclosure is made for minority interests in the consolidated balance sheets and statements of income. Investments in subsidiaries have been presented in the Company’s financial statements under the equity method.
A list of subsidiaries of the Group is set out in Note 10.
2.4 Investments in Associates Investments in associates are accounted for under the equity method in the consolidated and the Company’s financial statements. Under this method, the Group’s share of post-acquisition gains or losses from associates is recognized in the statements of income. The cumulative post-acquisition movements in the shareholders’ equity of associates are adjusted against the costs of investments. Associates are entities on which the Group has significant influence but no control. Unrealized gains or losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates unless the transactions provide evidence of impairment of the transferred assets. PTT Public Company Limited
141
Investments in associates include goodwill on acquisitions (net of accumulated amortization). When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognize further losses, unless the Group has incurred obligations in the liabilities of the associate or has to make repayments on behalf of the associate. If necessary, the accounting policies of associates have been changed to ensure consistency with the accounting policies adopted by the Group.
A list of associates of the Group is set out in Note 10.
2.5 Investments in Joint Ventures Investments in jointly controlled entities are accounted for under the proportionate consolidation method in the consolidated financial statements. Under this method, the Group combines its share of the joint ventures’ individual revenues, expenses, assets, liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements. The Group recognizes its share of gains or losses on sales of assets by the Group to the joint venture that is attributable to other venturers. The Group does not recognize its share from the joint ventures’ purchase of assets from the Group until the joint venturer resells the assets to an independent party. However, a loss from the purchase of assets from joint ventures is recognized immediately when evidence of a reduction in the assets’ net realizable value or an impairment occurs. If necessary, the accounting policies of joint ventures have been changed to ensure consistency with the accounting policies adopted by the Group. Interests in joint ventures are presented in the Company’s financial statements under the equity method. Investments in jointly controlled assets are accounted for under the proportionate consolidation method in the consolidated financial statements. Under this method, the Group includes its share of the joint ventures’ individual expenses, assets and liabilities in the relevant components of its financial statements based on the Joint Operating Agreements.
A list of joint ventures of the Group is set out in Note 10.
2.6 Other Investments The Group classifies investments other than investments in subsidiaries, associates and joint ventures as trading, available-for-sale, debt securities and general investments. Investments in marketable securities, classified as available-for-sale securities, are carried at fair value in the balance sheets. Increases/decreases in the carrying amounts are credited/charged against unrealized gains/losses on investments in available-for-sale securities, presented separately under the shareholders’ equity. Fair value is calculated by reference to the current bid prices of the Stock Exchange of Thailand at the balance sheet dates. Investments in non-marketable securities, classified as general investments, are carried at cost in the balance sheets and are adjusted for allowance for impairment of investments to recognize unrealized losses on investments if the value of investments decreases substantially. The Group carries out a test for impairment of investments 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 losses are recognized in the statements of income immediately. Upon the disposal of investments, the differences between the net proceeds from disposal and the carrying amounts of investments are recognized in the statements of income. Upon the disposal of partial investments in debt securities or equity instruments, the carrying amounts of the disposed portions are calculated under the weighted average method out of the total holding of the investments.
2.7 Related Parties Related parties are individuals or enterprises that, directly or indirectly, control or are controlled by or are under common control with the Company, including holding companies, subsidiaries and fellow subsidiaries. Associates and individuals owning, directly or indirectly, interests in the voting power of the Company that give them significant influence on the Company, key management personnel, directors or employees of the Company are also included as related parties. In considering each possible related party relationship, attention is directed more to the substance of the relationship than to the legal form. 142
PTT Public Company Limited
2.8 Foreign Currency Translations The Group translates foreign currency transactions into Baht by using the exchange rates prevailing on the transaction dates. The monetary assets and liabilities denominated in foreign currencies are translated into Baht by using the exchange rates prevailing on the balance sheet dates. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities in foreign currencies are recognized immediately in the statements of income. The monetary assets and liabilities of foreign operations are translated into Baht by using the closing rates at the balance sheet dates. The non-monetary assets and liabilities are translated into Baht by using the historical rates. Revenues and expenses are translated by using the average exchange rates during the periods. Differences from these translations are recognized as revenues or expenses in the statements of income. The Group translates assets and liabilities of jointly controlled foreign entities into Baht by using the closing rates at the balance sheet dates, whereas the income statements are translated by using the average exchange rates during the periods. Differences from these translations are presented as “Currency translation differences” under the shareholders’ equity. Assets and liabilities of self-sustaining foreign entities are translated into Baht by using the closing rates at the balance sheet dates. Revenues and expenses are translated by using the average exchange rates during the periods. Differences from these translations are presented under the shareholders’ equity. Upon the disposal of foreign entities, the Group recognizes the accumulated currency translation differences recorded in the shareholders’ equity as a part of gains or losses on disposal of those foreign entities.
2.9 Cash and Cash Equivalents Cash and cash equivalents, which are carried at cost, comprise cash on hand, deposits held at call with banks and other highly liquid short-term investments with original maturity of no more than three months. Bank overdrafts and short-term loans from financial institutions are shown as current liabilities in the balance sheets.
2.10 Trade Accounts and Notes Receivable Trade accounts receivable are carried at net realizable value. The allowance for doubtful accounts receivable is estimated from the percentages of the aging of outstanding receivables at the balance sheet dates, and anticipated non-collectible amounts based on the amounts of outstanding receivables at the balance sheet dates according to receivables’ repayment history and current financial status.
2.11 Advance Payment for Gas Purchased under Take-or-Pay Agreement The Company has entered into gas purchase agreements with natural gas producers, under which the Company is required to take delivery of natural gas at annual minimum quantities. During each contract year, if the Company cannot accept natural gas according to the minimum quantities under the agreements, it has to make prepayments for the quantities of natural gas which it can not accept (Take-or-Pay) in the next contract year. After the end of each contract year, the Company and the natural gas producers have to agree on the volumes of gas that should be taken into the calculation for Take-or-Pay for that contract year, subject to the basis and conditions in the agreements. Under the agreements, the Company can take volumes of prepaid gas (Make-up) in subsequent years after taking delivery of natural gas at the minimum quantities for that given contract year. The Company recognizes its obligations under the agreements as advance payment for gas purchased.
2.12 Inventories Inventories are stated at the lower of the acquisition costs or net realizable values. Costs are determined by using the weighted average cost method. Some associates apply the first-in, first-out (FIFO) or last-in, first-out (LIFO) methods to determine their inventory costs. However, the effect of differences in accounting policies for inventories is insignificant. The costs of imported petroleum products comprise various importation expenses and levies, surveyors’ fees and
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contribution to or compensation from the Oil Stabilization Fund, as the case may be. Net realizable values are estimated selling prices in the ordinary course of business, less costs of product completion and related selling expenses. The Group recognizes an allowance for decreases in inventory value for obsolete, slow-moving and defective inventories.
2.13 Materials and Supplies Materials and supplies are valued at the weighted average cost. Allowance is made in full for obsolete or defective and unserviceable items.
2.14 Property, Plant and Equipment Property, plant and equipment is initially recognized at cost less accumulated depreciation and allowance for impairment. Repair and maintenance costs are charged to the income statements during the periods in which they are incurred. The costs of major renovations are included in the carrying amounts of the assets when it is probable that the Group’s future economic benefits exceed the originally assessed performance standards of the assets. The major renovations are depreciated over the remaining useful lives of the related assets. General Properties Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets as follows: Buildings and building improvements
10 - 30 years
Machinery and equipment
10 - 30 years
Other assets
5 - 10 years
Where the carrying amount of an asset is greater than its net realizable value, which is the higher of the present value of anticipated future cash flows from the continuing use of the asset or the amount obtainable from the sale of the asset less any disposal costs, the carrying amount is written-down immediately to its net realizable value. The decrease is recognized in the statements of income. Gains or losses on disposal of property, plant and equipment are determined by comparing the proceeds from sales with the carrying amounts on the disposal dates, and are included in operating profit or loss. The capitalization rates used to determine the amounts of borrowing costs to be capitalized are the weightedaverage interest rates applicable to the outstanding borrowings during the year. Where funds are borrowed specifically for the construction or production of assets, the amounts of borrowing costs for capitalization are determined from the actual borrowing costs incurred during the year less any income from the temporary investments of those borrowings. Oil and Gas Exploration and Production Properties The exploration and production petroleum business accounts for oil and gas exploration and production properties by using the successful efforts method, which has the following accounting policies: Cost of Properties Costs of properties comprise the total acquisition costs of concession rights or the portion of acquisition costs applicable to properties as well as decommissioning costs. If exploratory wells establish proven reserves, and are included in the plan for development in the near future, exploratory drilling costs (both tangible and intangible) are initially capitalized as proved properties, otherwise the related costs are fully charged as expenses in the statements of income. Exploratory costs comprising geological and geophysical costs as well as area reservation fees incurred during the exploration stage, are charged as expenses in the statements of income as incurred. Development costs, irrespective of whether they relate to development wells or unsuccessful development wells, are capitalized.
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PTT Public Company Limited
Depreciation, Depletion and Amortization The capitalized acquisition costs of concession rights are depleted and amortized by using the unit of production method, which is based on the estimated proven recoverable reserves. Depreciation, depletion and amortization of exploratory wells, development and equipment costs and the operating costs of supporting equipment as well as decommissioning costs, with the exception of costs arising from unsuccessful projects, are calculated by using the unit of production method, which is based on the estimated proven recoverable and development reserves. Changes in reserve estimates are recognized prospectively. Proven recoverable and development reserves are calculated by the Group’s own engineers based on information from the Group’s joint ventures. Depreciation of the gas transportation pipelines of the Yadana and Yetagun projects is calculated by using the straight-line method over an estimated useful life of 30 years. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount, and the difference is charged to the statements of income.
2.15 Intangible Assets Intangible assets comprise expenditure on leasehold rights of land and/or buildings, land rights, computer software license, other operating rights, patents and goodwill. Amortization is calculated by using the straight-line method over the contract periods ranging from five to 30 years. Goodwill represents the excess of the business acquisition costs over the fair value of the Group’s share of the identifiable assets and liabilities of the acquired subsidiaries, associates or joint ventures at the business acquisition dates. Goodwill arising from the acquisitions of subsidiaries and joint ventures is reported in the balance sheets as an intangible asset, and is amortized by using the straight-line method over the estimated economic useful lives of no more than 20 years. The Group reviews the carrying amounts of intangible assets in the balance sheets. Where an indication of impairment exists, the carrying amounts of the relevant intangible assets are assessed and written-down to their recoverable amounts.
2.16 Finance Leases - Where the Group is the Lessee Leases of property, plant and equipment, where the lessee assumes substantial risks and rewards of ownership are classified as finance leases. The leased assets are capitalized at the lower of the net present value of underlying minimum lease payments or the fair value of the leased assets. Each minimum lease payment is allocated between liabilities and financial charges in order to achieve a constant interest rate on the remaining balance of the liabilities. The finance leases’ liabilities less financial charges are included in long-term loans. Interest expenses are charged in the statements of income over the lease periods. Depreciation is charged on the shorter of the estimated useful lives of the relevant assets or the lease periods. However, if it is certain that the ownership of the assets will be transferred to the lessee at the end of the lease periods, depreciation is charged over the estimated useful lives of the assets.
2.17 Operating Leases - Where the Group is the Lessee Leases of property, plant and equipment where the lessor assumes substantial risks and rewards of ownership are classified as operating leases. Payments made under operating leases are charged to the statements of income by using the straight-line method over the lease periods. Expenses incurred from the termination of operating lease agreements before maturity, i.e. the compensation paid to the lessor for such termination, are recognized as expenses for the periods in which the termination takes place.
2.18 Provision for Decommissioning Costs The Group records provision for decommissioning costs whenever an obligation is likely to arise as a result of a past event and the amount of the obligation can be reliably estimated.
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The Group recognizes provision for decommissioning costs, which is provided at the onset of the project completion, based on an estimate of the eventual costs related to the removal of the production facilities. These costs are included as part of the oil and gas properties and are amortized by using the unit of production method based on proven reserves. Provision for decommissioning costs is determined based on reviews and estimates by the Group’s own engineers and management’s judgment.
2.19 Pension Fund and Provident Fund The Company contributes to the Pension Fund scheme on a monthly basis at a rate of 10% of its employees’ salaries, and also contributes additional amounts to provide an adequate reserve at a rate of 100% of the pension obligation due to mature at the end of each accounting period. The contributions are included in other non-current liabilities in the balance sheets. The interest earned from the assets of the Pension Fund is recognized as income, while the contributions to the fund are recognized as expenses in the statements of income. The Company established a Provident Fund under the name of “the Registered Provident Fund of PTT Public Company Limited and Affiliates”. All employees joining the Company on or after October 1, 1993 are required to be members of the Provident Fund. Employees joining prior to October 1, 1993 may elect to be members of either the Pension Fund or the Provident Fund. The Company contributes to the Provident Fund on a monthly basis at a rate of 10% of its employees’ salaries and recognizes the contributions as expenses in the statements of income. On September 26, 2005, the Company established another Provident Fund under the name of “the Registered Provident Fund of PTT Public Company Limited and Affiliates (PTT Group)” and changed the name of the existing Provident Fund to “the Registered Provident Fund of PTT Public Company Limited and Affiliates (Fund 1)”. The objective was to give its employees the opportunity to choose investments (Employees’ Choices). The investment policy of Fund 1 is to invest in the combination of both debt securities and equity instruments (with investments in equity instruments constituting no more than 25% of total investments). PTT GROUP’s policy is to invest in short-term debt securities with an emphasis on debt securities issued by the Government, state enterprises and financial institutions. PTT GROUP has been effective since January 2006. The Group operates the Provident Funds which are managed by independent fund managers, and contributes to the funds on a monthly basis at determined rates. The contributions to the Provident Funds are recognized as expenses in the statements of income for the periods in which they are incurred.
2.20 Income Taxes For business without promotional privileges, the Group is taxed pursuant to the Revenue Code of Thailand, the Petroleum Income Tax Act B.E. 2514 (1971) and Amendment B.E. 2532 (1989), and the corporate income tax regulations of the Southeast Asian countries in which the Group has invested. Deferred income taxes are provided in full in the balance sheets by using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The principal temporary differences arise from the allowance for doubtful accounts, accumulated depreciation on property, plant and equipment and amortization of decommissioning costs, including the previous tax losses carried forward and differences between the fair value of the derived assets and their tax bases. The tax rates at the balance sheet dates are used in the determination of deferred income taxes. Deferred tax assets are recognized to the extent that it is probable that the Group’s future taxable profit will be available against which the temporary differences can be utilized.
2.21 Revenue Recognition The Group recognizes sales upon the delivery of products. Other income is recognized on the following bases: Interest income
- on a time proportional basis by using the effective yields of the interest bearing assets.
Royalty income
- based on the substance of the underlying agreements.
Dividend income
- when shareholders have the rights to receive dividends.
Revenues other than those mentioned above are recognized on an accrual basis.
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2.22 Earnings per Share Basic earnings per share is calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of ordinary shares held by third parties during the year. For diluted earnings per share, the Group adjusts net income for the year attributable to ordinary shares. The weighted average number of ordinary shares held by third parties during the year is adjusted by the number of potential diluted ordinary shares to assume that all potential diluted ordinary shares are converted into ordinary shares.
2.23 Financial Instruments Financial assets carried in the balance sheets comprise cash and cash equivalents, current investments, trade accounts and notes receivable, trade accounts receivable-related parties, other accounts receivable, advances, short-term loans to related parties and long-term loans to related parties. The financial liabilities carried in the balance sheets comprise bank overdrafts and short-term loans from financial institutions, trade accounts payable-others, trade accounts payable-related parties, other accounts payable-related parties and long-term loans. The particular accounting policies adopted are disclosed in the individual policy statements associated with each item. The Group utilizes financial instruments to reduce its exposure to risks arising from the fluctuations of foreign exchange rates, interest rates and oil market prices. The principal financial instruments are as follows: Forward Foreign Exchange Contracts The forward foreign exchange contracts protect the Group from risks arising from the fluctuations of exchange rates by determining the future rates at which foreign currency assets will be realized or foreign currency liabilities will be settled. The forward foreign exchange contracts are recognized in the financial statements at inception. The premium or discount on the establishment of each agreement is amortized over the contract period. Cross-currency and Interest Rate Swap Contracts The cross-currency and interest rate swap contracts protect the Group from risks arising from the fluctuations of foreign exchange rates and interest rates. The cross-currency and interest rate swap contracts are not recognized in the financial statements at inception. The financial assets and liabilities denominated in foreign currencies as at the balance sheet dates which are protected by such contracts are translated by using the exchange rates determined in the contracts. Gains or losses on early termination of the contracts or on repayment of the borrowings before maturity are recognized in the statements of income. Futures Oil and Gas Contracts The Company has entered into futures oil and gas contracts to hedge risks arising from the fluctuations of oil and gas prices in the world market in accordance with the oil and gas purchase and sale agreements by determining the future buying and selling prices. Gains or losses from such contracts are recognized in the statements of income at the end of the contracts.
The risk management policies are described in Note 32: Disclosure of Financial Instruments.
2.24 Segment Information The Company presents its financial information by business segments, not by geographical segments. The reason is that the revenues, operating results and total assets of the geographical segments other than Thailand are less than 10% of the consolidated revenues, operating results and total assets of all business segments.
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2.25 Adoption of Newly Issued Accounting Standards In October 2006, the Federation of Accounting Professions issued Notification No. 26/2006 regarding the Accounting Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries” (Amendment No. 1), under which the 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. (the entities which are not ready to adopt the cost method in 2006 can continue using the equity method through the end of 2006 and adopt the cost method from January 1, 2007 onwards). In this regard, the Company has elected to adopt the change in 2007. Had the Company adopted the change in 2006, its investments accounted for under the equity method would have decreased by Baht 95,769.09 million to be under the cost method, allowance for share of net loss over investments would have decreased by Baht 22.87 million, net income for the year ended December 31, 2006 would have decreased by Baht 30,706.59 million to Baht 64,554.01 million (Diluted earnings per share of Baht 22.99 per share) and shareholders’ equity in the balance sheet as of December 31, 2006 would have decreased by Baht 95,746.22 million to Baht 192,085.95 million.
3.
Cash and Cash Equivalents Cash and cash equivalents as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht Cash on hand
2006
The Company 2005
2006
2005
279.45
509.21
240.64
229.68
Deposits held at call with banks
26,488.86
25,978.08
11,268.47
4,798.32
Fixed deposits
19,587.96
11,976.80
9,300.00
6,500.00
Treasury bills
6,531.87
19,577.43
1,029.73
113.57
29,247.22
6,887.39
-
730.99
4,670.89
8,511.91
4,670.89
8,511.91
86,806.25
73,440.82
26,509.73
20,884.47
Promissory notes Bank of Thailand bonds Total
Cash and cash equivalents as of December 31, 2006 mainly bear interest at rates ranging from 0.10% to 5.00% per annum, (December 31, 2005: the interest rates range from 0.25% to 5.75% per annum).
4.
Current Investments Current investments as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
2006
The Company 2005
2006
2005
Fixed deposits
68.45
88.32
68.45
88.32
Treasury bills
391.54
-
-
-
Promissory notes
939.55
320.00
889.55
-
13.41
7.35
13.41
7.35
-
299.19
-
-
1,412.95
714.86
971.41
95.67
General investments Unit trusts Total
The Group’s deposits at banks and promissory notes as of December 31, 2006 were issued by local financial institutions, and bear interest rates ranging from 3.50% to 5.38% per annum (2005: the interest rates range from 1.00% to 4.00% per annum).
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PTT Public Company Limited
The treasury bills of the Group as of December 31, 2006 bear interest at rates ranging from 4.78% to 5.22% per annum. General investments as of December 31, 2006 amounting to Baht 13.41 million (2005: Baht 7.35 million) represent investments in the ordinary shares of Petro Asia (Sanshui) Co., Ltd. amounting to Baht 6.06 million and Petro Asia (Maomimg) Co., Ltd. amounting to Baht 7.35 million, net of allowance for impairment of investments. These investments are in the process of being disposed.
5.
Trade Accounts and Notes Receivable - Others, Net Trade accounts and notes receivable - others as of December 31, 2006 and 2005 are as follows:
Consolidated Unit : Million Baht Trade accounts receivable Notes receivable Total
2006
The Company 2005
2006
2005
83,709.20
66,694.60
69,993.48
53,921.88
2,390.97
3,206.47
2,390.97
3,206.47
86,100.17
69,901.07
72,384.45
57,128.35
2,449.12
2,382.37
1,670.24
1,510.05
83,651.05
67,518.70
70,714.21
55,618.30
Less Allowance for doubtful accounts Trade accounts and notes receivable - others, net
Aged trade accounts and notes receivable - others as of December 31, 2006 and 2005 can be analyzed as follows: Consolidated Unit : Million Baht Current
2006 70,936.30
The Company 2005
2006
2005
57,732.30
59,324.27
46,451.30
2,683.07
2,534.70
1,583.28
2,079.64
959.95
1,444.45
912.32
1,380.87
- Over 6 - 12 months
2,257.02
1,519.06
2,157.81
1,476.47
- Over 12 months
9,263.83
6,670.56
8,406.77
5,740.07
86,100.17
69,901.07
72,384.45
57,128.35
2,449.12
2,382.37
1,670.24
1,510.05
83,651.05
67,518.70
70,714.21
55,618.30
Overdue - Up to 3 months - Over 3 - 6 months
Total Less Allowance for doubtful accounts Trade accounts and notes receivable - others, net
Trade accounts and notes receivable - others, net as of December 31, 2006 include receivables from government agencies and state enterprises amounting to Baht 27,733.79 million in the consolidated financial statements (2005: Baht 19,046.78 million), and Baht 27,614.68 million in the Company’s financial statements (2005: Baht 18,881.51 million).
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6.
Related Party Transactions The following are details of significant transactions carried out with related parties.
6.1 Trade accounts receivable - related parties as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
2006
Subsidiaries Associates Other related parties
The Company 2005
2006
2005
-
-
10,415.53
20,077.16
32,013.50
19,822.83
30,462.38
18,154.13
474.45
2,244.18
367.09
2,244.18
-
-
94.43
0.84
32,487.95
22,067.01
41,339.43
40,476.31
254.70
268.14
262.55
276.42
32,233.25
21,798.87
41,076.88
40,199.89
Joint ventures
Less Allowance for doubtful accounts Trade accounts receivable - related parties, net
Aged trade accounts receivable - related parties as of December 31, 2006 and 2005 can be analyzed as follows: Consolidated Unit : Million Baht Current
2006
The Company 2005
32,139.61
2006
2005
21,899.84
37,551.51
35,492.97
Overdue 107.39
-
334.70
231.32
- Over 3 - 6 months
- Up to 3 months
99.46
99.45
96.15
709.47
- Over 6 -12 months
140.21
58.26
2,050.77
60.37
- Over 12 months Total
1.28
9.46
1,306.30
3,982.18
32,487.95
22,067.01
41,339.43
40,476.31
254.70
268.14
262.55
276.42
32,233.25
21,798.87
41,076.88
40,199.89
Less Allowance for doubtful accounts Trade accounts receivable - related parties, net
6.2 Other accounts receivable, advances and short-term loans - related parties as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
2006
The Company 2005
2006
2005
Other accounts receivable Subsidiaries Associates Other related parties Joint ventures
-
-
185.35
577.58
1,364.60
1,173.15
1,363.00
1,170.44
0.39
20.62
-
12.24
-
-
132.05
130.86
1,364.99
1,193.77
1,680.40
1,891.12
142.60
141.71
146.88
142.02
1,222.39
1,052.06
1,533.52
1,749.10
Less Allowance for doubtful accounts
150
PTT Public Company Limited
Consolidated Unit : Million Baht
2006
The Company 2005
2006
2005
Advances Subsidiaries
-
-
500.07
3.43
Associates
-
250.01
308.47
-
263.39
397.22
259.46
270.13
263.39
647.23
1,068.00
273.56
-
-
308.47
-
263.39
647.23
759.53
273.56
Subsidiaries
-
-
-
12,000.25
Associates
-
3,487.14
-
3,487.14
Joint ventures
-
-
302.21
-
-
3,487.14
302.21
15,487.39
1,485.78
5,186.43
2,595.26
17,510.05
Other related parties
Less Allowance for doubtful accounts
Short-term loans
Total
Changes in short-term loans - related parties for the year ended December 31, 2006 are as follows:
Unit : Million Baht
Consolidated
Balance as of December 31, 2005
3,487.14
15,487.39
-
302.21
- Payment for loans granted - Receipt from loan repayment
The Company
(3,487.14)
Balance as of December 31, 2006
-
(15,487.39) 302.21
Short-term loans to related parties are unsecured and bear interest at rates ranging from 6.03% to 6.17% per annum.
6.3 Advances and long-term loans - related parties as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
2006
The Company 2005
2006
2005
Advances Subsidiaries
-
-
1.08
1.51
Associates
-
304.86
-
304.86
-
304.86
1.08
306.37
-
304.86
-
304.86
-
-
1.08
1.51
-
-
240.00
25.00
5,807.69
5,807.69
5,807.69
5,807.69
-
185.18
-
185.18
5,807.69
5,992.87
6,047.69
6,017.87
5,807.69
5,992.87
6,048.77
6,019.38
Less Allowance for doubtful accounts
Long-term loans Subsidiaries Associates Other related parties
Total
PTT Public Company Limited
151
Changes in long-term loans - related parties for the year ended December 31, 2006 are as follows:
Unit : Million Baht
Consolidated
Balance as of December 31, 2005
The Company
5,992.87
6,017.87
-
215.00
- Payment for loans granted - Receipt from loan repayment
(185.18)
Balance as of December 31, 2006
5,807.69
(185.18) 6,047.69
Long-term loans to related parties bear interest at rates ranging from 3.13% to 7.69% per annum.
6.4 Trade accounts payable - related parties as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
2006
Subsidiaries Associates Other related parties
2005
2006
2005
-
-
8,369.36
12,920.87
28,793.75
17,826.54
28,162.13
17,441.24
374.29
800.09
267.00
800.09
-
-
705.89
559.94
29,168.04
18,626.63
37,504.38
31,722.14
Joint ventures Total
The Company
6.5 Other accounts payable - related parties as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
2006
Subsidiaries Associates
2005
2006
2005
-
-
233.01
29.53
449.93
309.70
89.17
103.16
63.16
24.94
48.76
24.94
-
-
1.69
0.51
513.09
334.64
372.63
158.14
Other related parties Joint ventures Total
The Company
6.6 Other long-term accounts payable - related parties as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
152
2006
The Company 2005
2006
2005
Subsidiaries
-
-
232.18
360.81
Joint ventures
-
-
16.77
-
Total
-
-
248.95
360.81
PTT Public Company Limited
6.7 Revenue and expense transactions carried out with related parties For the years ended December 31, 2006 and 2005 Consolidated Unit : Million Baht
2006
The Company 2005
2006
2005
Revenues Sales Subsidiaries
-
-
109,261.25
123,689.19
379,337.65
248,005.77
367,759.86
246,712.79
19,608.64
30,752.07
15,876.28
30,752.07
-
-
641.44
37.43
-
-
235.74
1,646.55
441.30
399.23
440.45
399.23
1.53
11.01
0.99
11.01
-
-
6.75
1.35
-
-
1,862.82
3,077.19
3,577.01
3,380.85
3,531.76
3,367.82
167.83
129.00
167.83
125.56
-
-
30.04
79.60
-
-
146,745.27
172,626.04
390,076.92
232,981.66
380,898.52
232,053.37
5,754.91
12,708.23
5,395.67
12,708.23
-
-
6,478.29
-
-
-
398.96
215.15
Associates
261.80
21.29
29.90
20.00
Other related parties
849.93
632.34
726.27
628.90
Associates Other related parties Joint ventures Interest income Subsidiaries Associates Other related parties Joint ventures Other income Subsidiaries Associates Other related parties Joint ventures Expenses Purchases Subsidiaries Associates Other related parties Joint ventures Other expenses Subsidiaries
The above related party transactions exclude transactions carried out with government agencies and state enterprises. The prices between the Company and its related parties are determined based on the normal prices used in the same types of business in transactions with third parties. With respect to the selling prices of natural gas between the Company and an associate, the Company has granted a special discount for five years from 2002 to 2007 to support the manufacturing capacity expansion project of the associate. However, the purchase volumes were insignificant. The prices of goods purchased from a subsidiary are the normal selling prices determined by the subsidiary with reference to the world market prices.
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6.8 Directorsû remuneration Directors’ remuneration for the year ended December 31, 2006 in the consolidated financial statements amounting to Baht 160.59 million (2005: Baht 79.75 million) and in the Company’s financial statements amounting to Baht 40.33 million (2005: Baht 28.49 million) comprises directors’ meeting fees and bonuses.
6.9 Crude oil purchase and sale transactions carried out with related parties without the delivery of products, with the objective of maintaining crude oil reserves, were offset in the financial statements. Details are as follows: Consolidated Unit : Million Baht
2006
The Company 2005
2006
2005
Sales Subsidiaries Associates
-
-
239.94
3,218.59
2,284.06
3,446.75
2,284.06
3,446.75
116.81
-
116.81
-
-
-
239.94
3,218.59
2,284.06
3,446.75
2,284.06
3,446.75
116.81
-
116.81
-
Other related parties Purchases Subsidiaries Associates Other related parties
7.
Inventories Inventories as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht Oil products Gas products Petrochemical products
2006
2005
2006
2005
9,781.61
19,731.85
7,193.65
8,562.29
397.48
413.37
396.03
413.37
4,570.33
2,985.38
-
-
368.11
370.71
367.73
200.46
15,117.53
23,501.31
7,957.41
9,176.12
Others Total
The Company
The Company’s inventories as stated above exclude the legal reserve, which is presented under other non-current assets as discussed in Note 16.
8.
Materials and Supplies Materials and supplies as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht Spare parts, equipment and others Less Allowance for obsolescence Materials and supplies, net
154
PTT Public Company Limited
2006
The Company 2005
2006
2005
7,679.12
5,855.95
1,742.00
1,617.64
126.65
323.09
58.78
54.13
7,552.47
5,532.86
1,683.22
1,563.51
9.
Other Current Assets Other current assets as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
2006
Other accounts receivable
The Company 2005
2006
2005
7,695.30
6,830.71
5,775.46
4,722.15
1,559.98
599.44
1,557.68
595.19
Other accounts receivable, net
6,135.32
6,231.27
4,217.78
4,126.96
Prepaid expenses
4,486.99
3,388.51
826.20
2,457.57
9,719.74
10,182.96
9,719.74
9,204.20
1,352.87
1,893.62
901.76
1,650.17
Undue input VAT
1,618.14
1,563.46
1,056.04
801.55
Others
1,857.31
1,060.34
134.01
145.41
25,170.37
24,320.16
16,855.53
18,385.86
Less Allowance for doubtful accounts
Refund receivable from the Oil Stabilization Fund Accrued interest income and other accrued income
Total
Other accounts receivable mainly represent excise tax and input VAT receivables. Refund receivable from the Oil Stabilization Fund comprises compensation for locally manufactured oil or imported oil and refunds from the Oil Stabilization Fund for exported oil or oil sold to outbound transportation barges. The compensation and refund rates are determined by the Committee of Energy Policy Administration.
10. Investments Accounted for under the Equity Method 10.1 Details of subsidiaries, associates and joint ventures of the Company are as follows: Country of Company
Incorporation
Shareholding Business
Percentage 2006
2005
Subsidiaries PTT Exploration and Production Public Co., Ltd.
Thailand
(PTTEP) PTT (Cambodia) Co., Ltd. (PTTCL) Subic Bay Energy Co., Ltd. (SBECL)
Petroleum exploration
66.13
66.32
and production Cambodia
Oil marketing
100.00
100.00
Cayman
Oil marketing
100.00
100.00
Management services
49.00
49.00
100.00
100.00
Islands Retail Business Alliance Co., Ltd. (RBA)
Thailand
and oil marketing PTT International Trading Pte. Ltd. (PTTT)
Singapore
International oil trading
PTT Natural Gas Distribution Co., Ltd. (PTTNGD)
Thailand
Natural gas
58.00
58.00
PTT LNG Co., Ltd. (PTTLNG)
Thailand
Natural gas
100.00
100.00
Bangkok Polyethylene Public Co., Ltd. (BPE)
Thailand
Petrochemicals
-
50.00
PTT Polyethylene Co., Ltd. (PTTPE)
Thailand
Petrochemicals
-
50.00
PTT Phenol Co., Ltd. (PPCL)
Thailand
Petrochemicals
40.00
40.00
PTT Chemical Public Co., Ltd. (PTTCH)
Thailand
Petrochemicals
55.19
50.03
PTT Polymer Marketing Co., Ltd. (PTTPM)
Thailand
Polymer marketing
75.00
50.00
PTT Public Company Limited
155
Country of Company
Incorporation
Shareholding Business
Percentage 2006
Rayong Refinery Public Co., Ltd. (RRC)
Thailand
Refining
PTT Utility Co., Ltd. (PTTUT)
Thailand
Generation and supply
2005 -
100.00
40.00
40.00
of electricity, steam and water for industry Energy Complex Co., Ltd. (EnCo)
Thailand
Commercial
50.00
50.00
PTT ICT Solutions Co., Ltd. (PTTICT)
Thailand
Information and
20.00
-
communication technology services PTT Polymer Logistics Co., Ltd. (PTTPL)
Thailand
Logistics services
100.00
-
Thai Oil Public Co., Ltd. (TOP)
Thailand
Refining
49.54
49.54
Star Petroleum Refining Co., Ltd. (SPRC)
Thailand
Refining
36.00
36.00
Rayong Refinery Public Co., Ltd. (RRC)
Thailand
Refining
48.75
-
Bangchak Petroleum Public Co., Ltd. (BCP)
Thailand
Refining
29.75
-
Thai Lube Blending Co., Ltd. (TLBC)
Thailand
Blending and bottling
48.95
48.95
Associates
lube oil Thai Petroleum Pipeline Co., Ltd. (THAPPLINE)
Thailand
Oil transmission pipeline
34.04
34.04
Petro Asia (Thailand) Co., Ltd. (PA (Thailand))
Thailand
Oil marketing
35.00
35.00
Petro Asia (Sanshui) Co., Ltd. (PA (Sanshui))
China
Oil marketing
-
25.00
Vietnam LPG Co., Ltd. (VLPG)
Vietnam
Bottling and selling LPG
45.00
45.00
KELOIL-PTT LPG Sdn. Bhd. (KPL)
Malaysia
Bottling and selling LPG
40.00
40.00
Aromatics (Thailand) Public Co., Ltd. (ATC)
Thailand
Petrochemicals
49.82
49.99
IRPC Public Co., Ltd.
Thailand
Petrochemicals
31.50
31.50
and refining
(Formerly Thai Petrochemical Industry Public Co., Ltd. (TPI))
Independent Power (Thailand) Co., Ltd. (IPT)
Thailand
Electricity generation
20.00
20.00
Thai Oil Power Co., Ltd. (TP)
Thailand
Generation and supply
26.00
26.00
of electricity
Joint Ventures Trans Thai-Malaysia (Thailand) Co., Ltd.
Thailand
Natural gas
50.00
50.00
Malaysia
Natural gas
50.00
50.00
Thailand
Generation and supply
35.00
35.00
(TTM (T)) Trans Thai-Malaysia (Malaysia) Sdn. Bhd. (TTM (M)) District Cooling System and Power Plant Co., Ltd. (DCAP)
of electricity and chilled water
156
PTT Asahi Chemicals Co., Ltd. (PTTAC)
Thailand
Petrochemicals
47.50
-
HMC Polymers Co., Ltd. (HMC)
Thailand
Petrochemicals
41.44
-
PTT Public Company Limited
10.2 Details of the subsidiaries, associates and joint ventures of subsidiaries are as follows: Country of Company
Incorporation
Shareholding Business
Percentage 2006
2005
Subsidiaries of PTTEP: PTTEP International Limited (PTTEPI)
Thailand
Petroleum exploration
100.00
100.00
Commercial
100.00
100.00
Petroleum exploration
100.00
100.00
and production PTTEP Offshore Investment Co., Ltd. (PTTEPO)
Cayman Islands
PTTEP Siam Limited (PTTEP Siam)
Thailand
and production PTTEP Services Limited (PTTEP Services)
Thailand
Services operation
100.00
100.00
PTTEP Kim Long Vietnam Co., Ltd. (PTTEPKV)
Cayman
Petroleum exploration
100.00
100.00
Islands
and production
Cayman
Petroleum exploration
100.00
100.00
Islands
and production
PTTEP Hoan-Vu Co., Ltd. (PTTEP HV)
Cayman
Petroleum exploration
100.00
100.00
Islands
and production
PTTEP Hoang-Long Co., Ltd. (PTTEP HL)
Cayman
Petroleum exploration
100.00
100.00
Islands
and production
Cayman
Petroleum exploration
100.00
100.00
Islands
and production
Cayman
Petroleum exploration
100.00
100.00
Islands
and production
Thailand
Petroleum exploration
100.00
100.00
Petroleum
100.00
100.00
PTTEP Southwest Vietnam Co., Ltd. (PTTEPSV)
PTTEP Oman Co., Ltd. (PTTEP OM)
PTTEP Algeria Co., Ltd. (PTTEP AG)
PTTEP (Thailand) Limited (PTTEP T)
and production PTTEP Iran Co., Ltd. (PTTEP IR)
Iran
Diamond Petroleum Co., Ltd. (DPC)
Thailand
Petroleum
100.00
100.00
PTTEP Merangin Co., Ltd. (PTTEPM)
Indonesia
Petroleum
100.00
100.00
PTTEP Bahrain Co., Ltd. (PTTEP BH)
Cayman Islands
Petroleum
100.00
-
PTTEP Holding Co., Ltd. (PTTEPH)
Cayman Islands
Petroleum
100.00
-
PTTEP Indonesia Co., Ltd. (PTTEP ID)
Cayman Islands
Petroleum
100.00
-
PTTEP Bengara I Co., Ltd. (PTTEPB)
Cayman Islands
Petroleum
100.00
-
Philippines
Oil marketing
100.00
100.00
Philippines
Oil marketing
100.00
100.00
Laos
Oil marketing
100.00
100.00
Subsidiaries of SBECL: PTT Philippines Trading Corporation (PTTTC) (Formerly Subic Bay Fuels Co., Inc. (SBFCI))
PTT Philippines Corporation (PTTPC) (Formerly Subic Bay Distribution, Inc. (SBDI))
Subsidiary of PTTCL: Houakhong Trading Co., Ltd. (Houakhong)
PTT Public Company Limited
157
Country of Company
Incorporation
Shareholding Business
Percentage 2006
2005
Subsidiaries of PTTCH: TOC Glycol Co., Ltd. (TOCGC)
Thailand
Petrochemicals
100.00
100.00
Thai Ethanolamines Co., Ltd. (TEA)
Thailand
Petrochemicals
100.00
100.00
Thai Choline Chloride Co., Ltd. (TCC)
Thailand
Petrochemicals
100.00
100.00
Thai Oleochemicals Co., Ltd. (TOL)
Thailand
Petrochemicals
100.00
100.00
NPC Safety and Environmental Services
Thailand
Safety and
100.00
100.00
60.00
60.00
51.00
51.00
Co., Ltd. (NPC S&E) NPTC Maintenance & Engineering Services
environmental services Thailand
Co., Ltd. (NPTC) Thai Tank Terminal Co., Ltd. (TTT)
Factory maintenance and engineering services
Thailand
Storage and transportation services for liquid chemicals, oil and gas
Bangkok Polyethylene Public Co., Ltd. (BPE)
Thailand
Petrochemicals
100.00
-
PTT Polyethylene Co., Ltd. (PTTPE)
Thailand
Petrochemicals
100.00
-
Associates of PTTEP: Energy Complex Co., Ltd. (EnCo)
Thailand
Commercial
50.00
50.00
PTT ICT Solutions Co., Ltd. (PTTICT)
Thailand
Information and
20.00
-
communication technology services Associate of PTTNGD: Amata Natural Gas Distribution Co., Ltd.
Thailand
Natural gas
50.00
50.00
Hong Kong
Aircraft refueling
25.00
25.00
(AMATA NGD) Associate of SBECL: FST Aviation Services Limited (FST)
services Associates of PTTCH: Bangkok Polyethylene Public Co., Ltd. (BPE)
Thailand
Petrochemicals
-
50.00
PTT Polyethylene Co., Ltd. (PTTPE)
Thailand
Petrochemicals
-
50.00
PTT Phenol Co., Ltd. (PPCL)
Thailand
Petrochemicals
30.00
40.00
PTT Polymer Marketing Co., Ltd. (PTTPM)
Thailand
Polymer marketing
25.00
25.00
PTT Utility Co., Ltd. (PTTUT)
Thailand
Generation and supply
40.00
40.00
of electricity, steam and water for industry Vinythai Public Co., Ltd. (VNT)
Thailand
Petrochemicals
24.98
23.02
Eastern Fluid Transport Co., Ltd. (EFT)
Thailand
Petrochemicals
22.65
22.65
20.00
-
transmission pipeline system PTT ICT Solutions Co., Ltd. (PTTICT)
Thailand
Information and communication technology services
158
PTT Public Company Limited
Country of Company
Shareholding
Incorporation
Business
Percentage 2006
2005
Jointly Controlled Entities of PTTEP: Carigali - PTTEPI Operating Company
Malaysia
Petroleum
50.00
50.00
Myanmar
Overseas gas
25.50
25.50
19.3178
19.3178
Sdn. Bhd. (CPOC) Moattama Gas Transportation Company (MGTC)
transmission pipelines
Taninthayi Pipeline LLC. (TPC)
Myanmar
Overseas gas transmission pipelines
Orange Energy Limited (Orange)
Thailand
Petroleum
53.9496
53.9496
B8/32 Partners Limited (B8/32 Partners)
Thailand
Petroleum
25.0009
25.0009
Thailand
Petrochemicals
50.00
50.00
Jointly Controlled Entity of PTTCH: Thai Ethoxylate Co., Ltd. (TEX)
Joint Ventures of PTT Exploration and Production Public Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Unocal III
Thailand
Chevron Thailand Exploration and Production Limited
E5
Thailand
Phu Horm
2005
5.00
5.00
Exxon Mobil Exploration and Production Korat Inc.
20.00
20.00
Thailand
Hess (Thailand) Limited
20.00
20.00
S1
Thailand
PTTEP Siam Limited
25.00
25.00
Bongkot
Thailand
PTT Exploration and Production Public Co., Ltd.
44.4445
44.4445
Pailin
Thailand
Chevron Thailand Exploration and Production Limited
45.00
45.00
Arthit
Thailand
PTT Exploration and Production Public Co., Ltd.
80.00
80.00
(Block E5 North)
Joint Ventures of PTTEP International Limited Project
Country
Operator
Shareholding Percentage 2006
2005
Yetagun
Myanmar
Petronas Carigali Myanmar (Hong Kong) Ltd.
19.3178
19.3178
Yadana
Myanmar
Total E&P Myanmar
25.50
25.50
Bongkot
Thailand
PTTEP International Limited
44.4445
44.4445
Carigali - PTTEPI Operating Company Sdn. Bhd.
50.00
50.00
Chevron Offshore (Thailand) Limited
15.00
15.00
PTTEP International Limited
30.00
30.00
(Block B13/38) Joint Development
Thailand -
Area Thailand -
Malaysia
Malaysia-B17 (Block B-17 & B-17-01) G4/43 Cambodia B
Thailand Cambodia
PTT Public Company Limited
159
Joint Ventures of PTTEP Offshore Investment Co., Ltd. (PTTEPO) Project
Country
Operator
Shareholding Percentage 2006
B8/32 & 9A1)
Thailand
Chevron Offshore (Thailand) Co., Ltd.
Indonesia
Indonesia
PT Medco E&P Merangin
2005
25.0010 -
25.0010 39.00
Merangin-12)
Joint Ventures of PTTEP Kim Long Vietnam Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Vietnam B
Vietnam
Chevron Vietnam (Block B), Ltd.
8.50
2005 8.50
& 48/95
Joint Ventures of PTTEP Southwest Vietnam Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Vietnam 52/97
Vietnam
Chevron Vietnam (Block 52), Ltd.
7.00
2005 7.00
Joint Ventures of PTTEP Hoan-Vu Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Vietnam 9-2
Vietnam
Hoan-Vu Joint Operating Company
25.00
2005 25.00
Joint Ventures of PTTEP Hoang-Long Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Vietnam 16-1
Vietnam
Hoang-Long Joint Operating Company
28.50
2005 28.50
Joint Ventures of PTTEP Algeria Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Algeria 433a
Algeria
Petro Vietnam Investment and Development Company
35.00
2005 35.00
& 416b
Joint Ventures of PTTEP Siam Limited Project
Country
Operator
Shareholding Percentage 2006
Phu Horm
2005
Thailand
Hess (Thailand) Limited
20.00
20.00
Thailand
PTTEP Siam Limited
75.00
75.00
(Block EU-1) S1
160
PTT Public Company Limited
Joint Ventures of PTTEP (Thailand) Limited Project
Country
Operator
Shareholding Percentage 2006
Bongkot
2005
Thailand
PTTEP (Thailand) Limited
44.4445
-
Thailand
PTTEP (Thailand) Limited
84.00
-
(Block G12/48) Arthit (Block G9/48)
Joint Ventures of PTTEP Merangin Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Indonesia
Indonesia
PT Medco E&P Merangin
2005
39.00
-
Merangin-12)
Joint Ventures of PTTEP Bengara I Co., Ltd. Project
Country
Operator
Shareholding Percentage 2006
Indonesia Bengara-1 Indonesia
PT Medco E&P Bengara
2005
40.00
-
1) PTTEPO held shares in Orange Energy Limited and B8/32 Partners Limited, which were concession holders in this project. 2) In 2006, PTTEPO transferred its total shareholding in this project to PTTEP Merangin Co., Ltd.
PTT Public Company Limited
161
10.3 Investments accounted for under the equity method as of December 31, 2006 and 2005 Consolidated Unit : Million Baht
Shareholding Percentage
2006
Cost Company
2006
2005
2005
Equity
method
Dividends
Allowance for
Allowance for
share of net
share of net
loss over
Cost
method investments method
Equity
loss over
method
investments
2006
2005
Associates: Refining Business Group 1. TOP
49.54
49.54
11,483.09
28,093.30
-
11,483.09 23,927.80
-
5,053.24
1,819.17
2. SPRC
36.00
36.00
14,770.48
14,733.04
-
14,770.48 12,509.94
-
-
-
3. RRC
48.75
-
8,515.39
19,095.76
-
-
-
-
-
-
4. BCP
29.75
-
4,060.18
4,511.24
-
-
-
-
15.67
-
5. THAPPLINE
34.04
34.04
2,682.35
-
-
2,682.35
-
-
-
-
6. TLBC
48.95
48.95
140.00
120.38
-
140.00
97.75
-
-
-
7. PA (Thailand)
35.00
35.00
131.25
-
-
131.25
-
-
-
-
8. PA (Sanshui)
-
25.00
-
-
-
7.17
6.07
-
-
-
9. VLPG
45.00
45.00
87.35
96.40
-
87.35
114.00
-
-
-
10. KPL
40.00
40.00
21.49
12.56
-
21.49
11.27
-
-
-
11. FST
25.00
25.00
1.13
1.10
-
1.13
0.94
-
-
-
12. ATC
49.83
49.99
4,423.12
5,539.21
-
4,423.12
3,851.99
-
966.05
1,331.54
13. IRPC (TPI)
31.50
31.50
20,363.81
21,674.38
-
20,364.91 20,364.91
-
-
-
14. VNT
24.98
23.02
3,297.39
3,273.54
-
3,070.87
3,127.28
-
171.70
-
15. EFT
22.65
22.65
2.26
7.43
-
2.26
6.88
-
0.52
-
16. IPT
20.00
20.00
400.19
915.58
-
400.19
556.84
-
-
-
17. AMATA NGD
50.00
50.00
80.00
197.71
-
80.00
177.47
-
60.00
-
18. TP
26.00
26.00
2,304.76
1,961.34
-
2,304.76
1,824.01
-
91.33
73.06
72,764.24 100,232.97
-
59,970.42 66,577.15
-
6,358.51
3,223.77
Oil Business Group
Petrochemicals Business Group
Exploration & Production and Gas Business Group
Total
162
PTT Public Company Limited
The Company Unit : Million Baht
Shareholding Percentage
2006
Cost Company
2006
2005
2005
Equity
method
Dividends
Allowance for
Allowance for
share of net
share of net
loss over
Cost
method investments method
Equity
loss over
method
investments
2006
2005
-
7,188.49
3,904.67
Subsidiaries: 1. PTTEP
66.13
66.32
9,615.13
62,443.79
-
9,483.34 51,724.45
2. PTTT
100.00
100.00
2.50
186.70
-
2.50
53.81
-
-
-
3. PTTCL
100.00
100.00
0.23
-
(22.87)
0.23
-
(58.16)
-
-
4. SBECL
100.00
100.00
1,154.81
514.29
-
0.41
- (1,016.57)
-
-
5. PTTNGD
58.00
58.00
418.14
890.49
-
418.14
819.30
-
377.00
324.80
6. PTTLNG
100.00
100.00
50.00
25.13
-
13.25
9.53
-
-
-
7. BPE
-
50.00
-
-
-
1,694.06
1,531.64
-
-
-
8. PTTPE
-
50.00
-
-
-
900.00
875.74
-
-
-
9. PTTPM
75.00
50.00
30.00
46.51
-
20.00
24.79
-
-
-
10. RRC
-
100.00
-
-
-
13,862.35 20,406.00
-
-
-
11. EnCo
50.00
50.00
400.00
389.54
-
-
-
-
12. RBA
49.00
49.00
0.49
26.49
-
0.49
15.92
-
-
-
13. PPCL
40.00
40.00
1,080.00
1,017.57
-
320.00
303.45
-
-
-
14. PTTUT
40.00
40.00
1,017.00
946.98
-
563.00
552.63
-
-
-
15. PTTCH
55.19
50.03
35,753.32
49,507.64
-
15,714.28 26,327.08
-
4,260.10
-
16. PTTICT
20.00
-
30.00
29.66
-
-
-
-
-
-
17. PTTPL
100.00
-
300.00
298.48
-
-
-
-
-
-
18. TOP
49.54
49.54
11,483.09
28,107.99
-
11,483.09 23,927.80
-
5,053.24
1,819.17
19. SPRC
36.00
36.00
14,770.48
14,733.04
-
14,770.48 12,509.94
-
-
-
20. RRC
48.75
-
8,515.39
19,095.76
-
-
-
-
-
-
21. BCP
29.75
-
4,060.18
4,511.24
-
-
-
-
15.67
-
22. THAPPLINE
34.04
34.04
2,682.35
-
-
2,682.35
-
-
-
-
23. TLBC
48.95
48.95
140.00
120.38
-
140.00
97.75
-
-
-
24. PA (Thailand)
35.00
35.00
131.25
-
-
131.25
-
-
-
-
25. PA (Sanshui)
-
25.00
-
-
-
7.17
6.07
-
-
-
26. VLPG
45.00
45.00
87.35
96.40
-
87.35
114.00
-
-
-
27. KPL
40.00
40.00
21.49
12.56
-
21.49
11.27
-
-
-
28. ATC
49.82
49.99
4,423.12
6,170.09
-
4,423.12
4,065.98
-
966.05
1,331.54
29. IRPC (TPI)
31.50
31.50
20,363.81
22,061.26
-
20,364.91 20,364.91
-
-
-
400.00
397.86
Associates: Refinings Business Group
Oil Business Group
Petrochemicals Business Group
PTT Public Company Limited
163
The Company (Continued) Unit : Million Baht
Shareholding Percentage
2006
Cost Company
2006
2005
method
Equity
2005
Dividends
Allowance for
Allowance for
share of net
share of net
loss over
Cost
method investments method
Equity
loss over
method
investments
2006
2005
Exploration & Production and Gas Business Group 30. IPT
20.00
20.00
400.19
915.58
-
400.19
556.84
-
-
-
31. TP
26.00
26.00
2,304.76
2,442.09
-
2,304.76
2,304.76
-
91.33
-
Joint Ventures: Exploration & Production and Gas Business Group 32. TTM (T)
50.00
50.00
5,110.00
5,018.73
-
4,240.00
3,018.55
-
-
-
33. TTM (M)
50.00
50.00
281.32
248.27
-
281.32
237.88
-
-
-
34. DCAP
35.00
35.00
350.00
293.63
-
350.00
333.21
-
-
-
35. PTTAC
47.50
-
66.50
66.18
-
-
-
-
-
-
36. HMC
41.44
-
9,117.12
9,712.64
-
-
-
-
-
-
(22.87) 105,079.53 170,591.16 (1,074.73) 17,951.88
7,380.18
Petrochemicals Business Group
Total
134,160.02 229,929.11
10.4 Movements in investments accounted for under the equity method for the year ended December 31, 2006 are as follows: Unit : Million Baht Balance as of December 31, 2005
The Company
66,577.15
170,591.16
- Share of net income from investments under the equity method
19,139.45
52,537.61
- Dividends received
(6,358.51)
(17,951.88)
- Reclassifications
17,165.76
98.17
4,181.38
28,057.33
-
9,117.12
- Additional investments - Business acquisition (Note 34) - Investment disposal
-
(3,750.00)
- Business disposal (Note 35)
-
(10,452.87)
- Amortization of negative goodwill (Note 35)
-
2,132.71
- Share of net loss over investments
-
(1,051.86)
- Unrealized gain on available-for-sale securities
(13.23)
(12.85)
- Surplus on dilution of investments
300.90
808.00
(10.78)
(193.53)
(749.15)
-
- Currency translation differences - Adjustment of inter-company accounts Balance as of December 31, 2006
164
Consolidated
PTT Public Company Limited
100,232.97
229,929.11
10.5 Movements in allowance for share of net loss over investments as of December 31, 2006 are as follows: Unit : Million Baht
Consolidated
Balance as of December 31, 2005
The Company
-
(1,074.73)
- Share of net income from investments under the equity method
-
55.28
- Debt to equity conversion
-
1,154.40
- Currency translation differences
-
356.46
- Reclassifications
-
(514.28)
-
(22.87)
Balance as of December 31, 2006
10.6 The Company没s share of the net assets and operating results of joint ventures included in the consolidated financial statements as of December 31, 2006 and 2005 is detailed as follows: Balance Sheets: As of December 31, 2006 and 2005 Unit : Million Baht
2006
2005
TTM (T)
TTM (M)
1,535.65
89.12
200.63
Non-current assets
13,526.64
770.05
Current liabilities
(1,166.22)
Non-current liabilities Net assets
Current assets
DCAP
PTTAC
HMC
TTM (T)
TTM (M)
13.03
4,149.17
941.24
128.29
58.36
-
-
986.47
53.56
3,940.60 12,539.88
797.22
835.86
-
-
(24.31)
(123.48)
(0.41) (1,060.29)
(826.62)
(18.69)
(55.26)
-
-
(8,877.34)
(586.59)
(770.00)
-
(708.55) (9,635.95)
(668.94)
(505.75)
-
-
5,018.73
248.27
293.62
66.18
237.88
333.21
-
-
6,320.93
3,018.55
DCAP
PTTAC
HMC
Statements of Income: For the years ended December 31, 2006 and 2005 Unit : Million Baht
2006
2005
TTM (T)
TTM (M)
DCAP
PTTAC
Revenues
2,534.37
110.61
306.46
0.07
Expenses
(1,404.19)
(84.32)
(346.05)
1,130.18
26.29
1,130.18
HMC
TTM (T)
TTM (M)
DCAP
PTTAC
HMC
4,175.24
9.17
6.93
15.26
-
-
(0.39) (3,341.51)
(883.10)
(4.09)
(21.19)
-
-
(39.59)
(0.32)
833.73
(873.93)
2.84
(5.93)
-
-
(0.59)
-
-
(90.88)
-
-
25.70
(39.59)
(0.32)
742.85
-
-
Gain (loss) before income taxes Income taxes Net income (loss)
(873.93)
(1.22) 1.62
(5.93)
PTT Public Company Limited
165
10.7 Significant events occurring during the year ended December 31, 2006 PTTEP During the year ended December 31, 2006, warrants were exercised to purchase ordinary shares in PTTEP under its Employee Stock Ownership Program (ESOP) as detailed in Note 24. The effect from the dilution of investments amounting to Baht 80.84 million was recognized as a surplus on dilution of investments in subsidiaries and associates, presented in the balance sheet under shareholders’ equity. In addition, after the exercise of warrants in the fourth quarter of 2006, the Company acquired additional ordinary shares in PTTEP of 1.37 million shares from third parties amounting to Baht 131.78 million. Consequently, as of December 31, 2006 the Company’s shareholding in PTTEP was 66.13%. Goodwill arising from the acquisition was Baht 95.16 million.
ATC The Company’s shareholding in ATC has decreased from 49.99% to 49.82% as of December 31, 2006 due to the exercise of warrants to purchase ordinary shares in ATC under its Employee Stock Ownership Program (ESOP) as detailed in Note 24. The effect from the dilution of investments amounting to Baht 6.65 million was recognized as a surplus on dilution of investments in subsidiaries and associates, presented in the balance sheet under shareholders’ equity.
PTTLNG On January 19, 2006, PTTLNG called for payment from the Company for the total remaining unpaid shares amounting to Baht 36.75 million. The Company paid for these shares on February 28, 2006.
PTTPE On January 25, 2006, PTTPE called for payment from shareholders for the total remaining unpaid shares amounting to Baht 500 million, including the Company’s portion of Baht 250 million. The Company paid for these shares on February 22, 2006.
PPCL PPCL’s extraordinary shareholders’ meetings No. 1/2006 held on February 15, 2006 and No. 2/2006 held on March 2, 2006 respectively passed and confirmed a resolution to increase the authorized share capital of PPCL by Baht 3,200 million from Baht 800 million to Baht 4,000 million by issuing 32 million additional ordinary shares at a par value of Baht 100 each. PPCL called for the first payment of Baht 1,200 million from shareholders. The Company paid for its portion of 40% amounting to Baht 480 million. PPCL’s extraordinary shareholders’ meetings No. 3/2006 held on August 2, 2006 and No. 4/2006 held on August 18, 2006 respectively passed and confirmed a resolution to increase the authorized share capital of PPCL by Baht 1,400 million from Baht 4,000 million to Baht 5,400 million by issuing 14 million additional ordinary shares at a par value of Baht 100 each. PPCL called for the first payment of Baht 700 million from shareholders. The Company paid for its portion of 40% amounting to Baht 280 million. However, PTTCH purchased PPCL’s additional shares for only a certain part of its entire investment portion, and ATC purchased the remaining of PTTCH’s portion. As a result, PTTCH’s shareholding in PPCL decreased from 40% to 30%, and ATC’s shareholding in PPCL increased from 20% to 30%. BCP On April 10, 2006, the Company’s shareholding in BCP decreased from 7.60% to 7.56% as convertible debenture shareholders exercised their convertible debentures to purchase 3.50 million ordinary shares. The effect from the dilution of investments amounting to Baht 96.67 million was recognized as a surplus on dilution of investments in subsidiaries and associates, presented in the balance sheet under shareholders’ equity.
166
PTT Public Company Limited
On March 16, 2006, the Company’s board of directors’ meeting No. 3/2006 passed a resolution to invest in additional ordinary shares and convertible debentures of BCP, with an investment limit of USD 120 million. On April 21, 2006, the Company and BCP co-signed a Share Subscription Agreement under which the Company would purchase additional ordinary shares in BCP at a price of Baht 14 per share and convertible debentures at a conversion price of Baht 14 per share, with an investment limit of USD 120 million. On May 16, 2006, the Company acquired 280.68 million additional ordinary shares in BCP at a price of Baht 14 per share amounting to Baht 3,954.86 million, including directly related acquisition costs of Baht 25.34 million. Consequently, the Company’s shareholding in BCP increased from 7.56% to 29.75%, and BCP’s status changed from a related company to an associate. Goodwill arising from the acquisition was Baht 257.08 million. In addition, on the same day, the Company acquired 58,560 units of BCP’s convertible debentures at a price of Baht 10,000 per unit and a conversion price of Baht 14 per share as mentioned in Note 11. IRPC (TPI) In the second quarter of 2006, the Company started recognizing an investment in TPI under the equity method as a result of an order from the Central Bankruptcy Court issued on April 26, 2006 to terminate the Business Reorganization Plan for TPI and its subsidiaries. On April 27, 2006, the annual general meeting of TPI’s shareholders No. 1/2006 approved the appointment of representatives from the Company to participate in the management and determination of financial and operating policies of TPI. The initial recognition of the investment in TPI under the equity method resulted in the difference of Baht 4,589.55 million between the acquisition costs and the book value of TPI’s identifiable assets and liabilities for the Company’s portion. On October 26, 2006, TPI’s extraordinary shareholders’ meeting No. 2/2006 passed the resolutions to change the company’s name from Thai Petrochemical Industrial Public Co., Ltd. to IRPC Public Co., Ltd. and to change its seal. On October 31, 2006, TPI registered the change of the company’s name with the registrar at the Ministry of Commerce, and changed its security symbol from “TPI” to “IRPC”. PTTUT During the year ended December 31, 2006, PTTUT called for payment from shareholders for its additional shares of Baht 1,135 million. The Company paid for its portion of 40% amounting to Baht 454 million. PTTUT’s extraordinary shareholders’ meetings No. 3/2006 held on December 1, 2006 and No. 4/2006 held on December 20, 2006 respectively passed and confirmed a resolution to increase the authorized share capital of PTTUT by Baht 3,384 million from Baht 3,475 million to Baht 6,859 million by issuing 33.84 million additional ordinary shares at a par value of Baht 100 each. PTTUT called for payment of Baht 36.91 per share whereby the Company’s portion of 40% amounted to Baht 499.64 million. However, as of December 31, 2006 PTTUT was in the process of registering the increase in share capital with the Ministry of Commerce. As a result, the Company accounted for this amount as advance payment for share subscription. TTM (T) In the second quarter of 2006, TTM (T) called for payment from shareholders for its additional shares of Baht 1,740 million. The Company paid for its portion of 50% amounting to Baht 870 million. RRC On June 5, 2006, RRC made an Initial Public Offering (IPO) for its 1,397.50 million ordinary shares, comprising 520 million additional ordinary shares and 877.50 million existing ordinary shares held by the Company at an IPO price of Baht 18 per share. The Company offered its 877.50 million shares jointly with RRC resulting in a gain on disposal of investments amounting to Baht 7,130.48 million as detailed in Note 35. After the IPO, the Company’s shareholding in RRC decreased from 100% to 49.99%, and RRC’s status changed from a subsidiary to an associate. A surplus on dilution of investments in subsidiaries and associates amounting to Baht 420.57 million was recognized in the balance sheet under shareholders’ equity. PTT Public Company Limited
167
On July 7, 2006, RRC registered its additional issued and paid-up share capital of 71.39 million shares, since an over-allotment agent had exercised its rights under the green-shoe options to purchase newly issued shares from RRC. As a result, the Company’s shareholding in RRC decreased from 49.99% to 48.75%. A surplus on dilution of investments in subsidiaries and associates amounting to Baht 142.19 million was recognized in the balance sheet under shareholders’ equity.
PTTCH During the year ended December 31, 2006, the Company acquired 9.17 million additional ordinary shares in PTTCH from third parties amounting to Baht 747.60 million. In addition, on September 28, 2006, PTTCH’s extraordinary shareholders’ meeting No. 1/2006 approved the issuance and offer of 358,974,300 additional ordinary shares in PTTCH to existing shareholders at a price of Baht 78 per share, which were subsequently sold. On December 1, 2006, the Company paid for a total of 247.33 million additional ordinary shares in PTTCH amounting to Baht 19,291.43 million. As a result, the Company’s shareholding in PTTCH increased from 50.03% to 55.19%. Goodwill arising from the acquisition was Baht 1,943.90 million.
PTTICT On June 26, 2006, the Company, PTTEP, PTTCH, TOP and ATC jointly established PTT ICT Solutions Co., Ltd. (PTTICT) with the objectives of providing all information and communication technology (ICT) services as well as developing new ICT potentials to increase business operation capacity. The initial service receivers were those companies who are currently PTTICT’s shareholders and affiliates of the Group. PTTICT had initial authorized share capital of Baht 150 million, comprising 15 million shares at a par value of Baht 10 per share. Each of the shareholder companies had a 20% shareholding, representing the Company’s investment portion of Baht 30 million, and PTTICT became a subsidiary of the Company.
PA (Sanshui) On November 16, 2005, the Company, together with existing shareholders of PA (Sanshui) entered into a contract to transfer the ownership rights in the total ordinary shares of PA (Sanshui) held by them to transferees at a price of Yuan 4 million (equivalent to Baht 19.16 million). The transfer is currently being processed. As of December 31, 2006, the Company accounted for the investment in PA (Sanshui) as a current investment.
PTTAC On August 1, 2006, the Company, together with Asahi Kasei Chemicals Corporation (AKCC) and Marubeni Corporation (Marubeni) jointly established PTT Asahi Chemical Co., Ltd. (PTTAC) with authorized share capital of Baht 200 million, comprising two million ordinary shares at a par value of 100 Baht each. The investment proportions of the Company, AKCC and Marubeni were 47.50%, 47.50%, and 5% of the authorized share capital, respectively. The first share payment was called at Baht 35 per share, whereby the Company’s portion amounted to Baht 33.25 million. As a result of the acquisition, PTTAC became joint ventures of the Company. On October 31, 2006, PTTAC’s board of directors’ meeting No. 2/2006 passed a resolution to call for the second payment for the authorized share capital at Baht 35 per share, whereby the Company’s portion amounted to Baht 33.25 million. HMC On August 3, 2006, the Company acquired existing ordinary and preferred shares in HMC Polymers Co., Ltd. (HMC) from existing shareholders as well as additional shares in HMC, totalling Baht 9,117.12 million. The Company’s shareholding was 41.44% of the authorized and paid-up share capital. As a result of the acquisition, HMC became joint ventures of the Company. Goodwill arising from the acquisition was Baht 3,539.17 million as detailed in Note 34.
168
PTT Public Company Limited
PTTPM On August 23, 2006, the Company’s board of directors’ meeting No. 8/2006 approved the acquisition of all of the ordinary shares in PTTPM held by BPE, representing a 25% shareholding, comprising 100,000 shares at a price of Baht 100 per share, totalling Baht 10 million. On September 4, 2006, the Company made payment for these ordinary shares. After the acquisition, the shareholdings of the Company and PTTCH were 75% and 25%, respectively. PTTPL On September 11, 2006, the Company registered the establishment of PTT Polymer Logistics Co., Ltd. (PTTPL) with the objective of providing logistics services to petrochemicals affiliates of the Company. PTTPL had authorized share capital of Baht 1,200 million, consisting of 12 million shares at a par value of Baht 100 each. The Company had a shareholding of 100% in PTTPL, and therefore, PTTPL became a subsidiary of the Company. On August 31, 2006, the Company made the first share payment for a 25% shareholding amounting to Baht 300 million in accordance with the resolution of the meeting held on August 8, 2006 regarding the establishment of PTTPL. PTTPE and BPE On October 2, 2006, the Company sold all of its ordinary shares in PTTPE and BPE to PTTCH, amounting to 11.50 million shares and 85 million shares, respectively in accordance with the resolution of the board of directors’ meeting No. 8/2006 held on August 23, 2006. The Company received payments for these shares from PTTCH amounting to Baht 1,750 million and Baht 2,000 million, respectively. After the disposal, PTTCH was the only major shareholder of PTTPE and BPE with a shareholding of 100% of the total paid-up share capital of each company. SBECL On July 1, 2006, two subsidiaries of SBECL changed their company names from Subic Bay Distribution, Inc. (SBDI) to PTT Philippines Corporation (PTTPC), and from Subic Bay Fuels Company, Inc. (SBFCI) to PTT Philippines Trading Corporation (PTTTC). On November 17, 2006, SBECL registered its additional share capital of 31.62 million shares amounting to USD 31.62 million (approximately Baht 1,154.40 million) in accordance with a Joint Restructuring Agreement and the resolution of the Company’s board of directors’ meeting No. 4/2001 held on April 26, 2001, which approved the conversion of debt to equity amounting to USD 31.62 million. However, the Company has still maintained its shareholding of 100%. VNT (An associate of PTTCH) During the first quarter of 2006, PTTCH acquired 59 million shares in VNT from third parties amounting to Baht 226.52 million. As a result, PTTCH’s shareholding in VNT increased from 23.02% to 24.98%.
11. Other Long-term Investments Details of other long-term investments as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht General investments
2006
The Company 2005
2006
2005
1,271.49
540.01
337.52
249.77
Investments in available-for-sale securities -
Investments in equity instruments
336.00
441.32
336.00
441.32
-
Investments in debt securities
585.60
-
585.60
-
-
Investments in mutual funds
300.45
-
-
-
635.78
1,107.99
635.00
1,107.99
3,129.32
2,089.32
1,894.12
1,799.08
Add Allowance for changes in value of investments Total
PTT Public Company Limited
169
11.1 Details of other long-term investments of the Company Country of Company
Incorporation
Shareholding Business
Percentage 2006
2005
Petro Asia (Huizhou) Co., Ltd. (PA (Huizhou))
China
Oil marketing
25.00
25.00
Petro Asia (Shantou) Co., Ltd. (PA (Shantou))
China
Oil marketing
15.00
15.00
PTT Mart Co., Ltd. (PTT Mart)
Thailand
Management services
49.00
49.00
Fuel Pipeline Transportation Co., Ltd. (FPT)
Thailand
Oil pipeline
2.76
2.76
Intoplane Services Co., Ltd. (IPS)
Thailand
Aircraft
16.67
16.67
Ratchaburi Power Co., Ltd. (RPCL)
Thailand
15.00
15.00
refuelling services Electricity generation Dhipaya Insurance Public Co., Ltd. (TIP)
Thailand
Insurance
13.33
13.33
Bangkok Aviation Fuel Services
Thailand
Aircraft
7.06
7.06
-
7.60
Public Co., Ltd. (BAFS)
refuelling services
Bangchak Petroleum Public Co., Ltd. (BCP)
Thailand
Refining
11.2 Details of other long-term investments of subsidiaries Country of Company
Incorporation
Shareholding Business
Percentage 2006
2005
Other Long-term Investments of PTTCH: Alliance Petrochemical Investment
Singapore
Petrochemicals
16.67
16.67
(Singapore) Pte. Ltd. (API) Other Long-term Investments of HMC: Rayong Olefins Co., Ltd. (ROC)
Thailand
Petrochemicals
5.91
-
Basell Advanced Polyolefins (Thailand)
Thailand
Petrochemicals
2.07
-
Co., Ltd. (BAPT)
11.3 Other long-term investments as of December 31, 2006 and 2005 Shareholding Company Unit : Million Baht
Percentage
Consolidated
2006
2005
2006
1. PA (Huizhou)
25.00
25.00
2. PTT Mart
The Company
2005
2006
Dividends
2005
2006
2005
General Investments 15.16
15.16
15.16
15.16
-
49.00
49.00
78.40
78.40
78.40
78.40
-
-
3. FPT
2.76
2.76
44.00
44.00
44.00
44.00
-
-
4. IPS
16.67
16.67
0.02
0.02
0.02
0.02
-
-
5. PA (Shantou)
15.00
15.00
60.84
60.84
60.84
60.84
-
-
6. RPCL
15.00
15.00
337.50
249.75
337.50
249.75
-
-
7. API
16.67
16.67
290.24
290.24
-
-
-
-
8. ROC
5.91
-
643.73
-
-
- 428.02
-
9. BAPT
2.07
-
18.19
-
-
-
-
1,488.08
738.41
535.92
448.17
216.59
198.40
198.40
198.40
1,271.49
540.01
337.52
249.77
Total investments accounted for under the cost method Less Allowance for impairment of investments Total general investments
170
-
PTT Public Company Limited
-
Shareholding Company Unit : Million Baht
Percentage 2006
2005
13.33
13.33
7.06
7.06
-
7.60
Consolidated 2006
The Company
2005
2006
312.00
312.00
312.00
24.00
24.00
24.00
-
105.32
336.00
Investments in Debt Securities Investments in Mutual Funds
Dividends
2005
2006
2005
312.00
48.00
30.40
24.00
17.10
9.90
-
105.32
-
-
441.32
336.00
441.32
585.60
-
585.60
-
300.45
-
-
-
635.78
1,107.99
635.00
1,107.99
1,857.83
1,549.31
1,556.60
1,549.31
3,129.32
2,089.32
1,894.12
1,799.08 493.12
40.30
Investments in Available-for-sale Securities Investments in Equity Instruments 10. TIP 11. BAFS 12. BCP Total investments in equity instruments
Add Allowance for changes in value of investments Total investments in available-for-sale securities Total other long-term investments
11.4 Movements in other long-term investments for the year ended December 31, 2006 are as follows: Unit : Million Baht
Consolidated
Balance as of December 31, 2005
2,089.32
- Unrealized loss on available-for-sale-securities
(472.21)
- Additional investments
1,635.72
- Allowance for impairment of investments
The Company 1,799.08 (472.99) 673.35
(18.19)
- Reclassifications
(105.32)
Balance as of December 31, 2006
3,129.32
(105.32) 1,894.12
11.5 Significant events occurring during the year ended December 31, 2006 RPCL During the year ended December 31, 2006, RPCL increased its authorized share capital from Baht 1,665 million to Baht 2,325 million, and called for payment from shareholders for the additional share capital amounting to Baht 585 million. The Company paid for its portion of 15% amounting to Baht 87.75 million. The Group accounted for investments in certain associates under the cost method, adjusted by allowance for impairment of investments, since the Company intended to dispose of these investments. In the consolidated financial statements, allowance for impairment of investments in associates and other related companies of Baht 216.59 million comprised allowance for impairment of investments in PTT Mart, PA (Huizhou), FPT, PA (Shantou) and BAPT amounting to Baht 78.40, 15.16, 44.00, 60.84 and 18.19 million, respectively. In the Company’s financial statements, the allowance amounted to Baht 198.40 million. Investments in Debt Securities On May 16, 2006, the Company acquired 58,560 units of name registered non-transferable unsecured subordinated convertible debentures of BCP No. 1/2006, at a par value of Baht 10,000 per unit amounting to Baht 585.60 million. The interest rate is 3% per annum, payable every six months with a redemption period of 10 years starting from the date of debenture issuance. The debentures can be converted into BCP’s ordinary shares at a conversion price of Baht 14 per share unless there is a subsequent revision of the conversion price in compliance with a condition under the right adjustments. PTT Public Company Limited
171
Investments in Mutual Funds On May 25, 2006, PTTCH reclassified investments in mutual funds from trading securities to available-for-sale securities due to changes in PTTCH’s investment policies.
12. Property, Plant and Equipment, Net Property, plant and equipment as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
Buildings
Land
Oil
and
Machinery
and
building
and
gas
Other
Construction
properties
assets
in progress
Total
improvements equipment
Cost As of December 31, 2005 - Business acquisition (Note 34)
4,897.20
17,799.72
201,859.78
162,761.20
10,665.49
74,357.17
472,340.56
-
81.48
1,704.50
-
87.03
112.16
1,985.17
- Business disposal (Note 35)
(152.48)
(1,280.17)
(49,665.96)
-
-
(413.87)
(51,512.48)
- Additions
475.72
395.56
2,518.53
38,723.87
1,307.79
49,487.92
92,909.39
- Borrowing costs
-
-
-
-
-
2,881.90
2,881.90
- Reclassifications
1,366.37
352.55
31,441.00
-
226.15
(35,723.05)
(2,336.98)
- Disposal
-
(4.87)
(231.40)
(1,420.62)
(307.63)
(12.15)
(1,976.67)
- Currency translation differences
-
(0.14)
(3.70)
(1,009.04)
(1.29)
(43.12)
(1,057.29)
6,586.81
17,344.13
187,622.75
199,055.41
11,977.54
90,646.96
513,233.60
As of December 31, 2005
-
(8,632.76)
(84,747.13)
(65,667.67)
(7,253.93)
- Business acquisition (Note 34)
-
(56.61)
(1,123.35)
-
- Business disposal (Note 35)
-
401.30
16,081.63
-
- Depreciation for the year
-
(832.61)
(9,100.97)
- Reclassifications
-
(8.46)
706.25
- Disposal
-
5.80
81.22
- Currency translation differences
-
0.07
As of December 31, 2006
-
As of December 31, 2005 As of December 31, 2006
As of December 31, 2006 Accumulated Depreciation
-
(1,249.04)
-
-
16,482.93
(1,036.67)
-
(25,458.05)
(145.91)
-
551.88
(1.18)
227.48
-
313.32
2.77
219.31
(2.46)
-
219.69
(9,123.27)
(78,099.58)
(79,937.34)
(8,280.57)
(42.87)
(373.13)
(244.96)
-
-
-
(660.96)
(42.87)
(373.13)
(244.96)
-
-
-
(660.96)
As of December 31, 2005
4,854.33
8,793.83
116,867.69
97,093.53
3,411.56
74,357.17
305,378.11
As of December 31, 2006
6,543.94
7,847.73
109,278.21
119,118.07
3,696.97
90,646.96
337,131.88
(14,487.80) -
(69.08)
- (166,301.49)
- (175,440.76)
Allowance for Impairment of Assets
Net Book Value
172
PTT Public Company Limited
The Company Unit : Million Baht
Land
Buildings
Machinery
and building
and
Other
Construction
improvements
equipment
assets
in progress
Total
Cost As of December 31, 2005
2,684.44
12,270.45
108,454.72
7,450.01
46,058.79
176,918.41
63.55
126.77
1,441.14
768.64
32,379.57
34,779.67
- Borrowing costs
-
-
-
-
2,778.17
2,778.17
- Reclassifications
1,117.08
230.44
7,108.15
41.82
(9,098.25)
(600.76)
-
(4.87)
(37.59)
(237.22)
-
(279.68)
3,865.07
12,622.79
116,966.42
8,023.25
72,118.28
213,595.81
As of December 31, 2005
-
(6,684.68)
(54,282.95)
(5,340.97)
-
(66,308.60)
- Depreciation for the year
-
(513.53)
(5,054.88)
(706.16)
-
(6,274.57)
- Reclassifications
-
-
0.10
-
-
0.10
- Disposal
-
2.45
36.28
192.26
-
230.99
As of December 31, 2006
-
(7,195.76)
(59,301.45)
(5,854.87)
-
(72,352.08)
- Additions
- Disposal As of December 31, 2006 Accumulated Depreciation
Allowance for Impairment of Assets As of December 31, 2005
(42.87)
(373.13)
(244.96)
-
-
(660.96)
As of December 31, 2006
(42.87)
(373.13)
(244.96)
-
-
(660.96)
As of December 31, 2005
2,641.57
5,212.64
53,926.81
2,109.04
46,058.79
109,948.85
As of December 31, 2006
3,822.20
5,053.90
57,420.01
2,168.38
72,118.28
140,582.77
Net Book Value
Borrowing costs of Baht 2,881.90 million in the consolidated financial statements (December 31, 2005: Baht 1,458.40 million) and Baht 2,778.17 million in the Company’s financial statements (December 31, 2005: Baht 1,346.02 million) were capitalized as part of costs of property, plant and equipment. The Group used capitalization rates ranging from 4.00% to 7.23% (December 31, 2005: from 4.00% to 5.00%). Buildings, manufacturing plants, machinery and equipment of Baht 17,686.37 million in the consolidated financial statements were used as collateral for long-term loans of Baht 6,764.29 million (the Company’s financial statements: none). As of December 31, 2006 and 2005, the assets acquired under finance leases included in other assets are vehicles. Details are as follows: Consolidated Unit : Million Baht
2006
The Company 2005
2006 163.20
2005
Cost
851.71
546.74
162.21
Less Accumulated depreciation
214.84
45.96
73.77
45.42
Net book value
636.87
117.24
472.97
116.79
PTT Public Company Limited
173
13. Intangible Assets Intangible assets as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
Leasehold
Other
Computer
rights/rights
operating
software
to use
rights
Goodwill
goodwill
1,648.56
7,863.94
1,217.37
11,714.31
(6,504.95)
15,939.23
37.69
-
186.45
-
-
224.14
(1,068.70)
-
-
6,504.95
5,369.81
Negative Total
Cost As of December 31, 2005 - Business acquisition (Note 34) - Business disposal (Note 35)
(66.44)
- Additions
247.75
485.09
312.65
5,736.65
-
6,782.14
42.51
676.56
107.34
-
-
826.41
- Disposal
(6.21)
(41.28)
-
-
-
(47.49)
- Currency translation differences
(0.03)
(1.11)
(4.42)
-
-
(5.56)
17,450.96
-
- Reclassifications
As of December 31, 2006
1,903.83
7,914.50
1,819.39
29,088.68
Accumulated Amortization As of December 31, 2005 - Business acquisition (Note 34) - Business disposal (Note 35) - Amortization for the year
(964.48) (15.17) 5.26
(2,492.21)
(139.07)
(423.22)
-
(140.38)
-
-
(155.55)
335.59
-
-
(3,108.45)
(2,767.60)
(318.83)
(93.50)
(0.46)
(0.68)
(107.34)
-
-
(108.48)
- Disposal
3.59
20.35
-
-
-
23.94
- Currency translation differences
0.06
0.68
2.48
18.11
-
21.33
As of December 31, 2006
2,403.75
(3,314.28)
(203.97)
- Reclassifications
(886.96)
704.70
900.49
(1,175.17)
(2,455.10)
(477.81)
(1,292.07)
-
(5,400.15)
-
(1,096.09)
-
-
-
(1,096.09)
-
-
-
-
-
-
Allowance for Impairment of Assets As of December 31, 2005 - Reversal of loss on impairment of assets
-
As of December 31, 2006
-
4.48 (1,091.61)
4.48 (1,091.61)
Net Book Value
174
As of December 31, 2005
684.08
4,275.64
1,078.30
11,291.09
(5,800.25)
11,528.86
As of December 31, 2006
728.66
4,367.79
1,341.58
16,158.89
-
22,596.92
PTT Public Company Limited
The Company Unit : Million Baht
Leasehold Computer
rights/rights
Other operating
software
to use
rights
Total
Cost As of December 31, 2005
624.80
6,103.81
51.55
6,780.16
- Additions
74.81
187.80
-
262.61
- Reclassifications
17.91
582.84
-
600.75
- Disposal
(0.98)
(16.62)
-
(17.60)
As of December 31, 2006
716.54
6,857.83
51.55
7,625.92
As of December 31, 2005
(456.36)
(2,017.88)
(33.87)
(2,508.11)
- Amortization for the year
(111.15)
(251.99)
(5.18)
(368.32)
(0.06)
-
-
(0.06)
6.98
-
7.96
Accumulated Amortization
- Reclassifications - Disposal As of December 31, 2006
0.98 (566.59)
(2,262.89)
(39.05)
(2,868.53)
-
(1,096.09)
-
(1,096.09)
Allowance for Impairment of Assets As of December 31, 2005 - Reversal of loss on impairment of assets
-
As of December 31, 2006
-
4.48
-
(1,091.61)
-
4.48 (1,091.61)
Net Book Value As of December 31, 2005
168.44
2,989.84
17.68
3,175.96
As of December 31, 2006
149.95
3,503.33
12.50
3,665.78
14. Income Taxes and Deferred Income Taxes Details of applicable income taxes for the Group are as follows: Tax Rates Petroleum income tax on petroleum business in Thailand pursuant to the Petroleum Income Tax Act, B.E. 2514 (1971) and B.E. 2532 (1989) Income tax under the Revenue Code
50% 30%
- Exemption for total net income of the Company for five accounting periods from 2002 to 2006
25%
- Exemption for net income of PTTEP not exceeding Baht 300 million for five accounting periods from 2002 to 2006 Corporate income tax in the Union of Myanmar Corporate income taxes in other countries in the Southeast Asia region
25% 30% 20% - 35%
PTT Public Company Limited
175
Income taxes recognized in the consolidated and the Company’s statements of income for the years ended December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
2006
The Company
2005
2006
2005
Petroleum income tax Current income tax
18,279.93
Deferred income tax
1,059.28
Total petroleum income tax
13,496.11 (220.44)
-
-
-
-
19,339.21
13,275.67
-
-
13,236.62
10,609.33
8,623.05
8,092.77
Income tax under the Revenue Code Current income tax Deferred income tax Total income tax under the Revenue Code
651.60
(257.28)
(34.95)
412.40
13,888.22
10,352.05
8,588.10
8,505.17
2,433.81
1,667.73
-
-
136.76
230.65
-
-
2,570.57
1,898.38
-
-
Current income tax
70.90
25.50
-
-
Deferred income tax
13.81
14.01
-
-
84.71
39.51
-
-
35,882.71
25,565.61
8,588.10
8,505.17
Corporate income tax in the Union of Myanmar Current income tax Deferred income tax Total corporate income tax in the Union of Myanmar Corporate income taxes in the Southeast Asia region
Total corporate income taxes in other countries in the Southeast Asia region Total income tax expenses
Deferred income taxes presented in the consolidated and the Company’s balance sheets as of December 31, 2006 and 2005 are as follows:
Unit : Million Baht
Consolidated
The Company
Deferred tax assets Income tax under the Revenue Code As of December 31, 2005 Business disposal (Note 35) Income tax expenses As of December 31, 2006
1,862.25 (693.10)
1,184.78 -
51.15
34.95
1,220.30
1,219.73
Petroleum income tax As of December 31, 2005 Income tax expenses As of December 31, 2006
176
PTT Public Company Limited
(9.08)
-
9.08
-
-
-
Unit : Million Baht
Consolidated
The Company
Corporate income tax in the Philippines As of December 31, 2005
45.24
-
Current income tax - MCIT
14.18
-
(28.38)
-
31.04
-
As of December 31, 2005
0.04
-
Income tax expenses
0.39
-
As of December 31, 2006
0.43
-
1,251.77
1,219.73
As of December 31, 2005
274.50
277.00
Income tax expenses
584.51
(118.25)
As of December 31, 2006
859.01
158.75
10,816.31
-
634.68
-
11,450.99
-
1,594.43
-
Income tax expenses As of December 31, 2006 Corporate income tax in Singapore
Total deferred tax assets Deferred tax liabilities Income tax under the Revenue Code
Petroleum income tax As of December 31, 2005 Income tax expenses As of December 31, 2006 Corporate income tax in the Union of Myanmar As of December 31, 2005 Income tax expenses As of December 31, 2006 Total deferred tax liabilities
(65.21)
-
1,529.22
-
13,839.22
158.75
Deferred tax assets mainly comprised allowance for doubtful accounts and accumulated depreciation of property, plant and equipment. Deferred tax liabilities mainly comprised accumulated depreciation of property, plant and equipment, amortization of decommissioning costs and unrealized gain on revaluation of decommissioning costs.
15. Advance Payment for Gas Purchased Advance payment for gas purchased as of December 31, 2006 and 2005 is as follows:
Unit : Million Baht Balance as of December 31, 2005 Less Make-up during the period Balance as of December 31, 2006
Consolidated
The Company
19,746.62
24,574.67
3,148.44
3,945.00
16,598.18
20,629.67
PTT Public Company Limited
177
The Company paid in advance for the committed gas volumes purchased from the Yadana and Yetagun gas fields in the Union of Myanmar irrespective of take-up in 1999-2001, in accordance with the established minimum volumes stated in the Export Gas Sales Agreements (Take-or-Pay). The Company has the rights to take the prepaid gas (Make-up) in subsequent years, without expiry.
16. Other Non-current Assets Other non-current assets as of December 31, 2006 and 2005 are as follows:
Consolidated Unit : Million Baht Retention and refundable deposits
2006
The Company
2005
2006
2005
112.46
143.15
36.12
31.74
Prepaid expenses
1,821.47
947.04
29.54
25.08
Inventories - legal reserve
9,158.70
12,800.76
9,158.70
7,921.22
182.45
690.31
29.58
509.14
11,275.08
14,581.26
9,253.94
8,487.18
Others Total
The Fuel Oil Trading Act B.E. 2543 (2000) categorizes the Company as an oil trader under section 7 of this Act to protect against and resolve fuel oil shortages. This Act prescribes that the oil traders under section 7 must reserve fuel oil in accordance with the categories and volumes set by the Director General of the Department of Energy Business. The Company currently reserves 5% of the trading volume, which is informed to the Director General of the Department of Energy Business, the Ministry of Energy.
17. Bank Overdrafts and Short-term Loans from Financial Institutions Bank overdrafts and short-term loans from financial institutions of the Group as of December 31, 2006 and 2005 are short-term loans from financial institutions, bearing interest at rates ranging from 6.20% to 8.25% per annum and from 2.00% to 3.64% per annum, respectively.
18. Other Current Liabilities Other current liabilities as of December 31, 2006 and 2005 are as follows:
Consolidated
The Company
Unit : Million Baht
2006
2005
2006
2005
Other accounts payable
6,989.62
7,316.47
3,289.47
4,360.55
42.43
39.31
25.20
24.39
125.53
185.64
67.89
121.24
2,640.08
1,859.13
2,311.33
1,648.94
783.13
656.57
21.72
15.83
1,933.18
1,959.16
642.30
399.52
12,513.97
12,016.28
6,357.91
6,570.47
Accounts payable - forward foreign exchange contracts (purchase), net Advances received Undue output VAT Retention (due not later than 1 year) Others Total
Accounts payable - forward foreign exchange contracts (purchase) resulted from entering into forward foreign exchange contracts to hedge risks arising from the fluctuations of the USD currency value associated with the repayment of foreign loans and the import of raw materials.
178
PTT Public Company Limited
19. Long-term Loans Long-term loans as of December 31, 2006 and 2005 are as follows: Current Portion of Long-term Loans Consolidated Unit : Million Baht
2005
2006
2005
12,258.15
8,356.35
11,000.00
8,000.00
391.85
671.13
391.85
431.56
Bonds - Baht currency
1,750.58
4,257.14
-
-
Bonds - Foreign currencies
7,002.59
8,234.09
-
-
208.97
108.03
101.18
52.94
21,612.14
21,626.74
11,493.03
8,484.50
Loans - Baht currency Loans - Foreign currencies
Liabilities from finance leases Total
2006
The Company
Long-term Loans Consolidated Unit : Million Baht
2006
2005
The Company 2006
2005
Loans - Baht currency
52,940.73
68,569.63
44,400.00
55,400.00
Loans - Foreign currencies
29,315.14
22,259.54
19,852.01
10,895.95
Bonds - Baht currency
72,181.70
53,814.29
70,118.00
50,000.00
Bonds - Foreign currencies
43,327.16
53,119.79
30,309.76
30,366.98
574.58
220.09
386.67
80.14
198,339.31
197,983.34
165,066.44
146,743.07
Liabilities from finance leases Total
The Company’s loans as of December 31, 2006 amounting to Baht 46,741.52 million (December 31, 2005: Baht 55,492.59 million) are secured by the Ministry of Finance. The loans of three subsidiaries amounting to Baht 6,764.29 million in the consolidated financial statements as of December 31, 2006 (December 31, 2005: Baht 6,571.43 million) are secured by machinery, buildings, manufacturing plants and structures. In addition, the Group has commitments in accordance with the stipulated conditions. On April 5, 2006, the Company signed a loan agreement of Yen 23,000 million with a maturity period of 30 years, the principal of which is repayable once at maturity. The interest is charged in USD, payable every six months at a rate of 4.45% per annum. On the same day, the Company entered into a Participating Swap contract (P-SWAP) to swap Yen for USD, equivalent to USD 196.94 million with a P-SWAP premium of approximately 1% per annum of the USD principal. The maturity date is April 7, 2036. On November 14, 2006, the Company signed a loan agreement of USD 300 million with a maturity period of seven years, bearing interest at a floating rate of LIBOR + 0.265% per annum, payable every six months. The principal is repayable in installments of USD 37.5 million every six months from May 2010 to November 2013. On September 26, 2006, a subsidiary signed a loan agreement for the Phenol Project with five local financial institutions totalling Baht 8,320 million. The loan agreement comprised a long-term loan of Baht 6,320 million and a short-term loan of Baht 2,000 million with a maturity period of 13 years and a grace period of three years, bearing interest at a rate equivalent to the six-month fixed deposit rate plus 2.5% to 2.625% per annum. As of December 31, 2006, the subsidiary drew down Baht 1,000 million of the long-term loan in accordance with the loan agreement.
PTT Public Company Limited
179
Long-term loans as of December 31, 2006 and 2005 can be classified by interest rate categories as follows: Consolidated Unit : Million Baht
2006
Floating interest rate
The Company
2005
2006
2005
29,669.67
28,500.36
13,210.76
3,092.59
Fixed interest rate
190,281.79
191,109.72
163,348.71
152,134.98
Total
219,951.46
219,610.08
176,559.47
155,227.57
Interest rates charged on long-term loans as of December 31, 2006 and 2005 are as follows: Consolidated
The Company
2006
2005
2006
2005
PTT bonds
3.49% - 8.75%
3.49% - 8.91%
3.49% - 8.75%
3.49% - 8.91%
Loans - Baht currency
3.52% - 9.06%
3.38% - 9.06%
9.06%
8.83% - 9.06%
5.35% - 6.78%
3.00% - 6.29%
5.35% - 5.94%
3.00% - 6.29%
4.45%
-
4.45%
-
Bonds - Baht currency
2.70% - 7.40%
2.70% - 5.95%
4.25% - 7.40%
4.25% - 5.95%
Bonds - Foreign currencies
3.85% - 7.86%
3.85% - 7.86%
4.55% - 5.88%
5.75% - 5.88%
Liabilities from finance leases
1.75% - 10.00%
1.75% - 10.00%
5.50% - 8.10%
5.50% - 8.10%
Loans - Foreign currencies - US Dollar - Japanese Yen
19.1 Loans Movements of loans in Baht currency and foreign currencies as of December 31, 2006 and 2005 are as follows:
Consolidated Unit : Million
Currency Baht
Balance as of December 31, 2005 - Business acquisition (Note 34) - Business disposal (Note 35) - Additions - Repayments
Balance as of December 31, 2006
US Dollar
Yen
in Baht
76,925.97
356.97
-
91,621.73
745.97
-
-
745.97
(11,000.00)
(150.00)
5,933.15
615.00
(8,375.00)
(166.30)
-
(14,724.02)
-
-
(2,754.93)
(12,258.15)
(26.37)
-
(12,650.00)
51,971.94
629.30
- Gain on exchange rate - Current portion
Total equivalent
-
23,000.00
23,000.00
(16,734.89) 36,752.01
82,255.87
The Company Unit : Million
Currency Baht
Balance as of December 31, 2005 - Additions - Repayments - Gain on exchange rate
180
Total equivalent
US Dollar
Yen
63,400.00
75.11
-
66,492.59
-
300.00
23,000.00
18,429.53
(8,000.00) -
(10.48)
-
(8,431.56)
-
-
(846.70)
-
(11,391.85)
- Current portion
(11,000.00)
(10.82)
Balance as of December 31, 2006
44,400.00
353.81
PTT Public Company Limited
in Baht
23,000.00
64,252.01
19.2 Bonds Bonds as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million
December 31, 2006 Baht
December 31, 2005
USD
Baht
USD
Unsecured unsubordinated bonds - USD currency
50,329.75
1,390.67
61,353.87
1,491.62
- Baht currency
73,932.28
-
58,071.43
-
Less Current portion - USD currency
(7,002.59)
(193.28)
(8,234.09)
- Baht currency
(1,750.58)
-
(4,257.14)
Total
115,508.86
1,197.39
106,934.07
(200.00) 1,291.62
The Company Unit : Million
December 31, 2006 Baht
December 31, 2005
USD
Baht
USD
Unsecured unsubordinated bonds - USD currency
30,309.76
836.57
30,366.98
737.52
- Baht currency
70,118.00
-
50,000.00
-
100,427.76
836.57
80,366.98
737.52
Total
The Company and the Group issued bonds and entered into various cross currency and interest rate swap contracts for some of their bonds. Details are as follows: On June 20, 2005, the Company issued unsecured unsubordinated bonds for sales to financial institutional investors with a principal amount of Baht 4,040 million and a redemption period of 10 years at a fixed interest rate of 4.75% per annum. However, the Company entered into a cross currency swap contract to swap Baht bonds for USD bonds amounting to USD 100 million at a fixed interest rate of 4.55% per annum, to be redeemed on June 20, 2015. On August 25, 2005, the Company issued unsecured unsubordinated Baht bonds for sales to financial institutional investors with a principal amount of Baht 4,118 million and a redemption period of 15 years at a fixed interest rate of 5.95% per annum. However, the Company entered into a cross currency swap contract to swap Baht bonds for USD bonds amounting to USD 100 million at a fixed interest rate of 5.48% per annum, to be redeemed on August 25, 2020. In addition, on November 17 and November 22, 2006, the Company signed an agreement with a financial institution for the cancellation of commitments in accordance with a cross currency swap contract to swap Baht currency of Baht 4,118 million at an interest rate of 5.48% per annum for USD currency of USD 100 million at a fixed interest rate of 4.55% per annum. In cancelling the agreement, the Company received compensation from the financial institution amounting to Baht 465 million. Consequently, the Company has commitments in Baht currency as before. On May 23, 2006, the Company issued two lots of unsecured unsubordinated bonds for sales to general investors and financial institutional investors with principal amounts of Baht 2,970 million and Baht 1,030 million and redemption periods of 10 years and 15 years, respectively. The interest is fixed at 6.17% and 6.53% per annum, payable every six months with redemption dates of May 23, 2016 and May 23, 2021, respectively.
PTT Public Company Limited
181
On October 12, 2006, the Company issued two lots of unsecured unsubordinated bonds for sales to general investors and financial institutional investors with principal amounts of Baht 4,000 million and Baht 8,000 million, and redemption periods of five years and 10 years, respectively. The interest is fixed at 5.53% and 5.79% per annum, payable every six months with redemption dates of October 12, 2011 and October 12, 2016, respectively. On March 27, 2003, PTTEP issued 2,500,000 unsecured unsubordinated bonds at a face value of Baht 1,000 each, totalling Baht 2,500 million with a redemption period of 15 years. The bonds bear interest at a rate of 4.625% per annum, payable every six months on March 27 and September 27 of every year. However, PTTEP entered into a cross currency swap contract to swap Baht bonds for the USD currency of USD 60.82 million at an interest rate of 3.85% per annum, to be redeemed on March 27, 2018.
19.3 Liabilities from Finance Leases Liabilities from finance leases as of December 31, 2006 and 2005 are as follows:
Consolidated Unit : Million Baht
2006
2005
The Company 2006
2005
Liabilities from finance leases -
Not more than 1 year
252.66
119.78
132.49
60.28
-
More than 1 year and not more than 5 years
620.73
241.14
420.86
87.50
Future finance charges
(89.84)
(32.80)
(65.50)
(14.70)
Present value of liabilities from finance leases
783.55
328.12
487.85
133.08
208.97
108.03
101.18
52.94
574.58
220.09
386.67
80.14
783.55
328.12
487.85
133.08
Present value of liabilities from finance leases -
Current liabilities (Not more than 1 year)
-
Non-current liabilities (More than 1 year and not more than 5 years)
Total
The maturity of long-term loans as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
182
2006 Loans-
Loans-
Bonds-
Bonds-
Liabilities
foreign
Baht
foreign
Baht
from finance
currencies
currency
currencies
currency
leases
Total
Not more than 1 year
391.85
12,258.15
7,002.59
1,750.58
208.97
21,612.14
More than 1-2 years
405.21
8,656.26
-
1,263.70
207.80
10,532.97
More than 2-5 years
8,948.61
30,560.89
-
19,100.00
366.78
58,976.28
More than 5 years
19,961.33
13,723.58
43,327.16
51,818.00
-
128,830.07
Total
29,707.00
65,198.88
50,329.75
73,932.28
783.55
219,951.46
PTT Public Company Limited
Consolidated Unit : Million Baht
2005 Loans-
Loans-
Bonds-
Bonds-
Liabilities
foreign
Baht
foreign
Baht
from finance
currencies
currency
currencies
currency
leases
Not more than 1 year More than 1-2 years More than 2-5 years
Total
671.13
8,356.35
8,234.09
4,257.14
108.03
21,626.74
1,085.59
11,904.73
7,958.11
1,757.14
91.07
22,796.64
3,540.27
29,417.64
-
2,057.15
129.02
35,144.08
More than 5 years
17,633.69
27,247.25
45,161.68
50,000.00
-
140,042.62
Total
22,930.68
76,925.97
61,353.88
58,071.43
328.12
219,610.08
The Company Unit : Million Baht
2006 Loans-
Loans-
Bonds-
Bonds-
Liabilities
foreign
Baht
foreign
Baht
from finance
currencies
currency
currencies
currency
leases
Total
Not more than 1 year
391.85
11,000.00
-
-
101.18
11,493.03
More than 1-2 years
405.21
8,000.00
-
-
109.08
8,514.29
More than 2-5 years
6,744.78
26,400.00
-
18,300.00
277.59
51,722.37
More than 5 years
12,702.02
10,000.00
30,309.76
51,818.00
-
104,829.78
Total
20,243.86
55,400.00
30,309.76
70,118.00
487.85
176,559.47
The Company Unit : Million Baht
2005 Loans-
Loans-
Bonds-
Bonds-
Liabilities
foreign
Baht
foreign
Baht
from finance
currencies
currency
currencies
currency
leases
Total
Not more than 1 year
431.56
8,000.00
-
-
52.94
8,484.50
More than 1-2 years
445.32
11,000.00
-
-
22.53
11,467.85
More than 2-5 years
1,433.41
26,400.00
-
-
57.61
27,891.02
More than 5 years
9,017.22
18,000.00
30,366.98
50,000.00
-
107,384.20
11,327.51
63,400.00
30,366.98
50,000.00
133.08
155,227.57
Total
20. Provision for Decommissioning Costs The Group recognized provision for liabilities as of December 31, 2006 for decommissioning costs expected to be incurred in the future as follows:
Unit : Million Baht Balance as of December 31, 2005 Exchange rate differences Provision for liabilities during the year Balance as of December 31, 2006
Consolidated 7,019.36 (839.62) 4,532.65 10,712.39
PTT Public Company Limited
183
21. Other Non-current Liabilities Other non-current liabilities as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
2006
Retention (due later than 1 year)
869.55
The Company
2005
2006
2005
477.67
676.94
327.17
Provision for loss on lawsuits
218.60
12.60
218.60
12.60
Deferred revenues
335.35
328.81
227.49
240.21
Other advances received
282.43
457.79
275.68
435.34
23.25
30.10
4.72
4.01
587.18
381.08
-
-
2,316.36
1,688.05
1,403.43
1,019.33
Pension Fund Others Total
22. Share Capital As of December 31, 2006, the Company had authorized share capital of 2,857,245,725 ordinary shares (as of December 31, 2005: 2,837,245,725 ordinary shares) with a par value of Baht 10 per share. The issued and fully paid-up share capital comprised 2,804,925,625 ordinary shares (as of December 31, 2005: 2,797,245,725 ordinary shares). Details are as follows: On April 26, 2006, the Company registered an increase in share capital with the Ministry of Commerce amounting to Baht 200 million from Baht 28,372.46 million to Baht 28,572.46 million through the issue of 20,000,000 additional ordinary shares at a par value of Baht 10 each. As a result, the number of authorized ordinary shares of the Company increased from 2,837,245,725 shares to 2,857,245,725 shares. Details of the issue and offer of warrants are as follows:
«—π∑’ËÕÕ°·≈–
Exercise right
The number of
The number of
Õ—μ√“°“√„™â ‘∑∏‘
Date of issue
Exercise price
(warrant per
exercised warrants
unexercised warrants
Last exercise date
and offer of warrants
(Baht per share)
ordinary share)
(Million units)
(Million units)
of warrants
September 1, 2005
183
1:1
7.68
32.32
August 31, 2010
September 29, 2006
234
1:1
-
20.00
September 28, 2011
7.68
52.32
23. Reserves 23.1 Legal Reserve Under the Public Limited Companies Act B.E. 2535 (1992), the Company is required to appropriate not less than 5% of its annual net income as legal reserve until the reserve fund reaches 10% of its authorized share capital. The legal reserve is non-distributable. On April 26, 2006, the Company appropriated its net income of Baht 7,245,725 as legal reserve. Accordingly, the balance of the legal reserve as of December 31, 2006 is Baht 2,857.25 million which has reached 10% of the Company’s authorized share capital, as stipulated in the Act.
184
PTT Public Company Limited
23.2 Reserve for Self-insurance Fund Reserves for Self-insurance Fund as of December 31, 2006 and 2005 are detailed as follows:
Unit : Million Baht
Consolidated
Balance as of December 31, 2005 Appropriated net income for the year 2006 Balance as of December 31, 2006
The Company
841.40
841.40
46.72
46.72
888.12
888.12
The Self-insurance Fund was set up with the objective of providing insurance coverage solely for the Company’s business. The Company has annually appropriated its net income from operations and interest income from the fund, to the fund.
24. Earnings per Share Basic earnings per share is calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of ordinary shares held by third parties during the period. For the calculation of diluted earnings per share, the Company assumes that all warrants of the Group allocated to directors, management and employees are converted into ordinary shares. Due to the total exercise of those warrants, the net income of the Group recognized in the Company’s financial statements is adjusted by decreases in shareholding proportions. The number of diluted shares is calculated by considering a market price (an average market price of the Company’s ordinary shares during the period) and exercise prices. This calculation is prepared to determine the number of ordinary shares to be added to ordinary shares held by third parties for the calculation of diluted earnings per share. The calculation of basic earnings per share and diluted earnings per share in the consolidated and the Company’s financial statements for the years ended December 31, 2006 and 2005 is detailed as follows:
Basic Earnings per Share 2006
Diluted Earnings per Share
2005
2006
2005
95,260,603,360
80,104,496,160
Net income attributable to ordinary shareholders before extraordinary items (Baht) Adjustment of net income (Baht)
95,260,603,360
80,104,496,160
-
-
95,260,603,360
80,104,496,160
95,196,860,340
80,058,077,072
-
5,416,796,542
-
5,416,796,542
95,260,603,360
85,521,292,702
95,196,860,340
85,474,873,614
2,799,752,669
2,797,245,725
2,808,118,415
2,799,953,629
(63,743,020)
(46,419,088)
Net income before extraordinary items for the calculation of earnings per share (Baht) Extraordinary items (Baht) Net income for the calculation of earnings per share (Baht) Weighted average number of ordinary shares for the calculation of earnings per share (Shares) Net income before extraordinary items 34.02
28.63
33.90
28.59
Extraordinary items (Baht/share)
(Baht/share)
-
1.94
-
1.94
Earnings per share (Baht/share)
34.02
30.57
33.90
30.53
PTT Public Company Limited
185
The adjustment of net income resulted from the issue of name registered non-transferable warrants to purchase ordinary shares, by the Company and the Group to their directors, management and employees. Information regarding the issue of warrants to purchase ordinary shares to the Company’s employees is provided in Note 22. PTTEP On April 12, 2006, PTTEP registered a split in par value of its ordinary shares from Baht 5 per share of 664.40 million shares to Baht 1 per share of 3,322 million shares, totalling Baht 3,322 million. As a result of the registration of the split in par value of its ordinary shares, the number of ordinary shares reserved for the exercise of warrants under PTTEP’s Employee Stock Ownership Program allocated to employees changed from 12.40 million shares to 62 million shares, and the exercise rights (warrant per ordinary share) and exercise prices also changed. Details are as follows:
Exercise right
The number of
The number of
Date of issue
Exercise price
(warrant per
exercised warrants
unexercised warrants
Last exercise date
and offer of warrants
(Baht per share)
ordinary share)
(Million units)
(Million units)
of warrants
August 1, 2002
22.2
1:5
9.65
0.35
July 31, 2007
August 1, 2003
23.4
1:5
7.05
2.95
July 31, 2008
August 1, 2004
36.6
1:5
6.41
7.59
July 31, 2009
August 1, 2005
55.6
1:5
2.89
11.11
July 31, 2010
August 1, 2006
91.2
1:5
-
14.00
July 31, 2011
26.00
36.00
ATC Details of the issue and offer of warrants to purchase ordinary shares allocated to ATC’s employees are as follows: Exercise right
The number of
The number of
Date of issue
Exercise price
(warrant per
exercised warrants
unexercised warrants
Last exercise date
and offer of warrants
(Baht per share)
ordinary share)
(Million units)
(Million units)
of warrants
February 2, 2004
10
1:1
11.55
3.05
November 23, 2007
PTTCH Details of the issue and offer of warrants to purchase ordinary shares allocated to PTTCH’s employees are as follows: The number of
The number of
Date of issue
Exercise price
(warrant per
exercised warrants
unexercised warrants
Last exercise date
and offer of warrants
(Baht per share)
ordinary share)
(Million units)
(Million units)
of warrants
September 29, 2006
186
Exercise right
66.50
PTT Public Company Limited
1:1
-
29
September 28, 2011
25. Sales and Services Sales and services for the years ended December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
2006
The Company
2005
2006
2005
Oil products
857,446.01
651,892.12
883,609.72
700,697.34
Gas products
223,916.98
213,570.37
248,221.81
213,724.45
Petrochemical products
135,405.82
67,676.16
55,200.76
52,678.02
Utility products
3,608.12
-
-
-
Services
6,457.06
2,112.64
-
-
12,848.71
8,981.95
-
-
926,269.34 1,187,032.29
967,099.81
Less Petroleum royalties and remuneration Total
1,213,985.28
Sales and services for the years ended December 31, 2006 and 2005 include sales and services to government agencies and state enterprises amounting to Baht 97,954.89 million in the consolidated financial statements (2005: Baht 103,804.87 million), and amounting to Baht 97,184.52 million in the Company’s financial statements (2005: Baht 102,809.92 million).
26. Other Income Other income for the years ended December 31, 2006 and 2005 is as follows: Consolidated
The Company
Unit : Million Baht
2006
2005
Interest income
3,197.86
1,497.85
1,584.91
2,303.26
Penalty income
370.05
271.33
564.56
247.14
5,252.20
3,276.31
6,075.48
5,273.87
493.12
40.30
65.10
40.30
3,544.26
2,221.33
3,544.26
2,221.33
Transportation income Dividend income
2006
2005
Compensation for loan interest for advance payment for gas purchased Gain on foreign exchange
9,924.88
0.68
4,944.11
-
Others
2,439.35
2,127.87
2,189.11
2,659.13
25,221.72
9,435.67
18,967.53
12,745.03
Total
In the Company’s financial statements for the year ended December 31, 2005, loss on foreign exchange of Baht 234.52 million is included in the selling and administrative expenses. Other income for the year ended December 31, 2005 includes revenues from the settlement of a dispute between the Company and a foreign contractor over a breach of the construction contract for the laying of the RayongBangpakong-Wang Noi onshore parallel natural gas pipelines. After the settlement of the dispute, the damage claims recorded by the Company decreased by Baht 826.07 million. Compensation for loan interest for advance payment for gas purchased (Take-or-Pay) represents the Company’s compensation received from the Electricity Generating Authority of Thailand (EGAT) and the Independent Power Plants (IPPs) to absorb interest on the loans obtained by the Company for advance payment for gas purchased.
PTT Public Company Limited
187
27. Share of Net Income from Investments under the Equity Method Share of net income from investments under the equity method for the years ended December 31, 2006 and 2005 includes share of gain (loss) on foreign exchange as follows:
Consolidated Unit : Million Baht Share of net income before gain (loss) on foreign exchange Add share of gain (loss) on foreign exchange Total
2006
The Company
2005
2006
2005
15,312.53
22,725.09
44,293.51
3,826.92
(1,073.83)
8,244.10
19,139.45
21,651.26
52,537.61
53,836.57 (852.13) 52,984.44
28. Extraordinary Items In November 2004, the board of directors of the Company approved a short-term loan to RRC amounting to USD 1,134.75 million (Baht 44,255.25 million), bearing interest at a rate of LIBOR + 2.5% per annum for the refinancing of RRC’s loans. On January 17, 2005, the lenders reduced their loans to RRC by USD 200.25 million (Baht 7,738.28 million), equivalent to 15% of the original loans of USD 1,335 million. Consequently, the loans were reduced to USD 1,134.75 million (Baht 44,255.25 million). Gain from debt restructuring of Baht 7,738.28 million (USD 200.25 million) is presented as an extraordinary item in the consolidated statement of income for the year ended December 31, 2005 amounting to Baht 5,416.80 million, net of income tax of Baht 2,321.48 million.
29. Operating Income The following items, classified by natures, were charged in arriving at the operating income for the years ended December 31, 2006 and 2005:
Consolidated Unit : Million Baht Gain (loss) on foreign exchange
2006
The Company
2005
2006
2005
9,924.88
0.68
4,944.11
(234.52)
25,311.26
17,440.88
6,187.76
6,266.53
146.79
38.20
86.81
37.99
Depreciation of property, plant and equipment -
Owned assets
-
Assets under finance leases
Amortization of intangible assets -
Negative goodwill
-
Other intangible assets
(1,516.78) 616.29
(460.92) 460.15
-
-
368.32
315.08
Reversal of loss on impairment of property, plant and equipment -
Current operations
Staff costs
188
PTT Public Company Limited
(4.48) 9,626.18
(43.76) 6,647.02
(4.48) 4,753.42
4,088.02
30. Interest Expenses Interest expenses for the years ended December 31, 2006 and 2005 are as follows:
Consolidated
The Company
Unit : Million Baht
2006
2005
Loans from financial institutions
5,534.17
4,925.37
3,847.37
4,512.35
Bonds
4,626.35
3,541.49
2,834.61
2,123.51
32.10
6.36
18.79
5.88
813.00
338.44
619.25
145.60
11,005.62
8,811.66
7,320.02
6,787.34
Liabilities from finance leases Others Total
2006
2005
31. Segment Information The financial information classified by business segments in the consolidated financial statements for the years ended December 31, 2006 and 2005 is as follows:
Consolidated For the year ended December 31, 2006 Unit : Million Baht
Petroleum Natural exploration and Oil
Sales - others - related parties
Gas
production
930,391.06 192,554.24 65,051.46
PetroRefining
chemicals
Others
Elimination
19,566.30
12,288.59
72,033.80
69,701.06
64,100.51
4,642.27
- (12,848.71)
-
-
76,418.65
76,389.10
76,676.07
- (255,624.99) 1,213,985.28 -
52,129.69
-
Total
- 1,226,833.99
- (255,624.99)
-
Petroleum royalties and remuneration Net sales Gross margin
-
995,442.52 244,683.93 12,860.66
43,958.71
55,308.48
5,907.21
24,177.77
EBITDA
5,003.40
44,805.96
63,313.21
6,468.88
24,334.12
Depreciation and amortization
2,054.19
5,571.19
14,898.52
740.83
EBIT
2,949.21
39,234.77
48,414.69
0.17
80.24
(8.66)
-
-
(12,848.71)
(443.28)
141,769.55
(619.55)
(631.17)
142,674.85
2,691.66
48.22
750.42
26,755.03
5,728.05
21,642.46
(667.77)
(1,381.59)
115,919.82
-
215.16
52,537.61
(33,685.07)
19,139.45
Share of net income (loss) from associates Interest-net
(7,838.86)
Other income
12,650.43
Gain on foreign exchange
9,924.88
Income taxes
(35,882.71)
Minority interests
(18,652.41)
Net Income
95,260.60
PTT Public Company Limited
189
Unit : Million Baht
Petroleum Natural exploration and Oil
Segment assets Inter-company assets
Gas
production
PetroRefining
132,128.60 208,468.68 149,317.62
chemicals - 116,940.40
Others
Elimination
43,113.43
1,225.95
11,182.03
8,076.58
-
719.91
1,252.30
1.10
197.71
419.21
-
6,554.54
93,060.41
-
Total 649,968.73
(22,456.77)
-
Investments accounted for under the equity method Total segment assets
133,355.65 219,848.42 157,813.41
- 124,214.85 137,426.14
(22,456.77)
Non-allocated assets
750,201.70 1,251.77
Total Assets Segment liabilities
100,232.97
751,453.47 71,620.30
48,747.95
52,016.14
-
27,836.82
183,070.68
-
Inter-company liabilities
2,998.47
6,687.30
4,215.23
-
4,588.72
3,967.05
(22,456.77)
-
Total segment liabilities
74,618.77
55,435.25
56,231.37
-
32,425.54
187,037.73
(22,456.77)
383,291.89
Non-allocated liabilities
13,839.22
Total Liabilities Capital Expenditure
383,291.89
397,131.11 2,942.95
35,375.73
39,419.22
31.63
13,844.88
2,408.94
-
94,023.35
Consolidated For the year ended December 31, 2005 Unit : Million Baht
Petroleum Natural exploration and Oil
Sales - others - related parties
Gas
production
PetroRefining
chemicals
698,245.43 181,124.07
12,333.29
28,435.17
15,113.33
107,017.57
27,805.72
56,021.76
112,840.20
409.94
-
-
(8,981.95)
-
-
805,263.00 208,929.79
59,373.10
141,275.37
15,523.27
Others
Elimination -
-
- (304,095.19)
Total 935,251.29 -
Petroleum royalties and remuneration Net sales Gross margin
-
-
(8,981.95)
- (304,095.19)
926,269.34
-
2,017.93
115,180.53
12,176.67
40,905.28
44,804.48
13,158.19
2,117.98
EBITDA
7,252.65
42,109.57
50,051.48
13,205.20
1,739.86
(375.52)
61.39
114,044.63
Depreciation and amortization
2,088.53
4,813.42
9,429.93
1,337.35
426.68
16.47
(633.79)
17,478.59
EBIT
5,164.12
37,296.15
40,621.55
11,867.85
1,313.18
(391.99)
695.18
96,566.04
0.02
68.39
206.60
-
(5.67)
52,984.44
(31,602.52)
21,651.26
Share of net income (loss) from associates Interest-net
(7,302.27)
Other income
3,352.13
Gain on foreign exchange Income taxes
190
0.69 (25,565.62)
Extraordinary items
5,416.80
Minority interests
(8,597.74)
Net Income
85,521.29
PTT Public Company Limited
Unit : Million Baht
Petroleum Natural exploration and Oil
Segment assets
Gas
production
108,789.70 166,541.98 137,868.86
Inter-company assets
PetroRefining
chemicals
Others
56,763.23
73,068.23
38,299.05
17,093.69
13,311.18
5,023.35
7,987.58
447.84
12,114.24
0.93
177.47
397.86
-
6,523.48
59,477.41
125,884.32 180,030.63 143,290.07
64,750.81
80,039.55
109,890.70
Elimination -
Total 581,331.05
(55,977.88)
-
Investments accounted for under the equity method Total segment assets
(55,977.88)
Non-allocated assets
66,577.15 647,908.20 1,898.46
Total Assets
649,806.66
Segment liabilities
56,414.31
39,234.99
54,241.51
16,559.15
26,967.07
165,271.45
-
Inter-company liabilities
10,251.61
2,801.49
4,970.27
22,600.16
4,206.98
11,147.37
(55,977.88)
-
Total segment liabilities
66,665.92
42,036.48
59,211.78
39,159.31
31,174.05
176,418.82
(55,977.88)
358,688.48
Non-allocated liabilities
358,688.48
12,685.24
Total Liabilities
371,373.72
Capital Expenditure
2,141.74
40,443.33
55,528.82
285.04
1,763.49
722.97
-
100,885.39
Pricing among business segments is based on normal market prices except for pricing among business sectors within the Company for which net market prices, after the deduction of management fees with respect to petroleum terminals and operating fees, are applied. EBITDA
means
Earnings before interest expenses, finance costs, income taxes, depreciation and amortization, including other expenses and income not relevant to operations.
EBIT
means
Earnings before interest expenses, finance costs, income taxes, including other expenses and income not relevant to operations.
The Group categorizes segments for major business as follows: Oil Business The Group conducts oil business, which can be categorized into two income generating activities, in both domestic and overseas markets. 1. Oil marketing: marketing of fuel oil and lubricant products through channels of retail, commercial and international markets. 2. Oil trading: international trading, import and export of crude oil, fuel oil products, raw materials and petrochemicals products. Natural Gas Business The Group conducts natural gas business including procurement, natural gas pipeline transmission, natural gas separation and distribution in both domestic and overseas markets. Exploration and Production Petroleum Business The Group conducts exploration and production petroleum business in both domestic and overseas markets. The Group is the operator and jointly invests with leading exploration and production companies. Most domestic projects are located in the Gulf of Thailand. Overseas projects cover the Asia Pacific and Middle East regions.
PTT Public Company Limited
191
Refining Business The Group conducts refining business, including the production and distribution of finished oil products for both domestic and overseas customers. Petrochemicals Business The Group conducts petrochemicals business, including the procurement of feedstock for petrochemicals plants, and the production and distribution of main petrochemicals products and by-products, for both domestic and overseas markets. Other operations of the Group mainly represent other segments, none of which constitutes a separately reportable segment.
32. Disclosure of Financial Instruments The Company has faced principal financial risks with respect to the fluctuations of exchange rates, interest rates, and oil and gas prices in the world market. Some of the Company’s sale, purchase and borrowing transactions are denominated in foreign currencies. In addition, the Company’s borrowings to finance its operations bear interest at both fixed and floating rates. As a result, the Company’s management has entered into derivative instrument contracts to hedge all potential risk exposure. The strategies for hedging risks comprise forward foreign exchange contracts and cross-currency and interest rate swap contracts. The risk exposure associated with oil prices in the world market is managed through forward oil price contracts. The department responsible for managing the risk exposure arising from exchange rates and oil and gas prices in the world market, has to report to the Company’s management details of the costs and market prices of all financial instruments, including outstanding forward foreign exchange contracts and forward oil and gas price contracts. The reported information principally covers the risk exposure arising from: -
foreign exchange rates
-
currencies and interest rates
-
interest rates
-
the fluctuations of oil and gas prices
-
credit risks
32.1 Risks from Foreign Exchange Rates During the year ended December 31, 2006, the Company entered into forward foreign exchange contracts (purchase) for the procurement of raw materials and the repayment of foreign loans for a total amount of USD 163 million, equivalent to approximately Baht 5,854.99 million, maturing in January and June 2007. In addition, due to the import of finished oil, the Company entered into forward foreign exchange contracts (sale) of USD 81.04 million, equivalent to approximately Baht 2,925.37 million, maturing in January 2007. The receivable amounts and exchange rates under the forward foreign exchange contracts as of December 31, 2006 and 2005 are as follows: Consolidated Unit : Million Baht
2006
The Company
2005
2006
2005
Forward foreign exchange contracts (purchase) At the rates of Baht 35.0818 - 44.0560 = 1 USD
7,217.28
10,286.72
5,854.99
10,286.72
At the rates of Baht 49.5100 - 49.5130 = 1 EUR
-
10.15
-
-
7,217.28
10,296.87
5,854.99
10,286.72
2,934.15
334.05
2,925.37
-
Total Forward foreign exchange contracts (sale) At the rates of Baht 35.5000 - 39.3500 = 1 USD
192
PTT Public Company Limited
32.2 Risks from Currencies and Interest Rates The Group entered into various cross-currency and interest rate swap contracts. The terms of the outstanding cross-currency and interest rate swap contracts as of December 31, 2006 and 2005 are as follows:
Consolidated
The Company
Unit : Million Baht
2006
2005
2006
2005
- Baht 4,040 million/USD 100 million
3,623.08
4,117.46
3,623.08
4,117.46
- Baht 4,118 million/USD 100 million
-
4,117.46
-
4,117.46
- USD 60.82 million/Baht 2,500 million
2,203.82
2,500.00
-
-
- USD 193.28 million/Yen 23,000 million
7,002.59
8,074.96
-
-
12,829.49
18,809.88
3,623.08
8,234.92
Total
The maturity of the contracts can be analyzed as follows:
Consolidated
The Company
Unit : Million Baht
2006
2005
More than 1 year but not more than 5 years
7,002.59
8,074.96
-
-
More than 5 years
5,826.90
10,734.92
3,623.08
8,234.92
12,829.49
18,809.88
3,623.08
8,234.92
Total
2006
2005
32.3 Risks from Interest Rates The Group entered into various interest rate swap contracts. The terms of the outstanding interest rate swap contracts as of December 31, 2006 and 2005 are as follows:
Consolidated Unit : Million Baht
2006
The Company
2005
2006
2005
Interest rate swap contracts to swap floating for fixed rate in Baht currency
504.13
-
-
-
5,028.83
-
-
-
5,532.96
-
-
-
Interest rate swap contracts to swap floating for fixed rate in USD currency Total
The maturity of the contracts can be analyzed as follows:
Consolidated Unit : Million Baht More than 1 year but not more than 5 years
2006
The Company
2005
2006
2005
264.13
-
-
-
More than 5 years
5,268.83
-
-
-
Total
5,532.96
-
-
-
PTT Public Company Limited
193
32.4 Risks from the Fluctuations of Oil Prices The Company has entered into forward oil price contracts. As of December 31, 2006, the outstanding forward oil price contracts had maturity periods within January 2007. The total oil volume under such contracts was 0.12 million barrels. PTTT has entered into gross refinery margin swap contracts to swap floating for fixed gross refinery margin with a total oil volume of 0.10 million barrels, maturing within one to three months.
32.5 Credit Risks Credit risks arise when customers do not comply with the credit agreements or contracts, causing financial losses to the Company. However, the Company conducts commercial business with customers who are large companies in the electricity business group and large industrial sectors. In addition, collateral is requested for doing business with other customers. Consequently, the Company has no significant credit risk.
32.6 Fair Value of Financial Instruments The majority of the carrying values of financial assets and liabilities of the Group are classified as short-term. The fair values of these financial assets and liabilities approximate their carrying values. The Group calculates the fair values of long-term loans and fixed interest rate bonds by using the discounted cash flow method based on the discounted rates of those with similar borrowing conditions. For forward foreign exchange contracts, cross-currency and interest rate swap contracts and participating swap contracts, the Group calculates their fair values by using the exchange rates determined by the Group’s banks as if those contracts were cancelled as of the balance sheet dates. Forward oil and gas price contracts are presented at their fair values based on their quoted market prices as of December 31, 2006 and 2005. Details are as follows:
Consolidated Unit : Million Baht
2006 Carrying Value
2005 Fair Value
Carrying Value
Fair Value
Long-term loans - Baht currency
65,198.88
66,057.69
76,925.98
78,471.76
Long-term loans - Foreign currencies
29,706.99
29,503.85
22,930.67
22,198.72
3,314.28
3,279.36
-
-
70,618.00
74,306.70
58,071.43
56,919.54
50,329.75
47,029.35
61,353.88
62,975.33
-
27.84
-
(2.15)
-
0.42
-
(14.78)
-
690.45
-
676.82
Participating swap contracts
-
(345.36)
-
-
Forward oil price contracts
-
-
76.35
Secured unsubordinated bonds - Baht currency Unsecured unsubordinated bonds - Baht currency Unsecured unsubordinated bonds - Foreign currencies Forward foreign exchange contracts (purchase) Forward foreign exchange contracts (sale) Cross-currency and interest rate swap contracts
194
PTT Public Company Limited
7.73
The Company Unit : Million Baht
2006 Carrying Value
2005 Fair Value
Carrying Value
Fair Value
Long-term loans - Baht currency
55,400.00
56,258.81
63,400.00
64,946.75
Long-term loans - Foreign currencies
20,243.86
20,040.72
11,327.51
10,595.56
70,118.00
73,806.70
50,000.00
48,967.48
30,309.76
26,908.92
30,366.98
30,754.24
-
21.02
-
-
0.56
-
321.36
Unsecured unsubordinated bonds - Baht currency Unsecured unsubordinated bonds - Foreign currencies Forward foreign exchange contracts (purchase) Forward foreign exchange contracts (sale)
(2.01)
Cross-currency and interest rate -
353.29
-
Participating swap contracts
swap contracts
-
(345.36)
-
-
Forward oil price contracts
-
(11.35)
-
23.96
33. Dividend Payment On April 11, 2006, the annual general meeting of the Company’s shareholders approved a dividend payment for the year 2005 of Baht 9.25 per share from 2,797,245,725 shares amounting to Baht 25,874.52 million. The Company made the dividend payment to its shareholders on April 25, 2006. On August 23, 2006, the Company’s board of directors’ meeting No. 8/2006 approved an interim dividend payment for the operating results of the first half of 2006 at Baht 5 per share from 2,804,600,425 shares amounting to Baht 14,023 million. The Company made the interim dividend payment to its shareholders on September 22, 2006.
34. Business Acquisition During the year ended December 31, 2006, the Company acquired HMC as described in Note 10.7. Details of the net assets acquired and goodwill are as follows:
Unit : Million Baht Purchase consideration (Note 10.4)
9,117.12
Less Fair value of net assets acquired
5,577.95
Goodwill
3,539.17
Assets and liabilities derived from the acquisition are as follows: Unit : Million Baht Cash and cash equivalents
2,931.33
Accounts receivable
1,267.84
Inventories, materials and supplies Other current assets Other long-term investments Property, plant and equipment (Note 12)
668.74 76.59 1,757.11 736.13
Intangible assets (Note 13)
68.59
Other non-current assets
14.01
Bank overdrafts and short-term loans from banks
(248.66)
PTT Public Company Limited
195
Assets and liabilities derived from the acquisition are as follows: (Continued)
Unit : Million Baht Accounts payable
(859.43)
Current portion of long-term loans (Note 19.1)
(37.30)
Accrued expenses
(72.19)
Long-term loans (Note 19.1)
(708.67)
Other non-current liabilities
(16.14)
Fair value of net assets
5,577.95
Less Purchase consideration (Note 10.4)
9,117.12
Goodwill
3,539.17
35. Business Disposal On June 5, 2006, RRC made an Initial Public Offering (IPO) for its 1,397.50 million ordinary shares, including 877.50 million shares held by the Company whereby the Company offered its 877.50 million shares jointly with RRC. After the IPO, the Company’s shareholding in RRC decreased from 100% to 49.99%, and RRC’s status changed from a subsidiary to an associate. A gain on disposal of investments amounting to Baht 7,130.48 million arose as detailed in Note 10.7. The effect from the disposal of investments is detailed as follows:
Unit : Million Baht Proceeds from disposal of investments
15,450.64
Less Investments disposed of (Note 10.4)
10,452.87
Add Amortization of negative goodwill (Note 10.4)
2,132.71
Gain on disposal of investments (Note 10.7)
7,130.48
Unit : Million Baht Cash and cash equivalents Accounts receivable
10,840.31
Inventories, materials and supplies
9,029.26
Other current assets
1,277.10
Property, plant and equipment (Note 12)
35,029.56
Intangible assets (Note 13)
(2,602.21)
Deferred tax assets (Note 14) Other non-current assets Bank overdrafts and short-term loans from financial institutions Accounts payable Other current liabilities Long-term loans (Note 19.1) Other non-current liabilities
196
1,699.24
693.10 5,564.72 (1,100.00) (14,122.16) (2,462.36) (16,734.89) (11.77)
Net shareholders’ equity
27,099.90
Less Outstanding investments after business disposal
16,647.03
Investments disposed of (Note 10.4)
10,452.87
PTT Public Company Limited
On February 17, 2005, PTTEPO sold of all of its shares in New Links to Encore Int’l Limited and received payments for shares and warranty claims for a total amount of Baht 9,101.84 million (USD 236.5 million). The net book value of investment was Baht 9,679.71 million. A loss of Baht 577.87 million arose from the investment disposal. On November 17, 2005, PTTEPO sold some of its shares in Orange Energy Limited and B8/32 Partners Limited to Palang Sophon International Limited, for an amount of Baht 2,052.61 million while the net book value of investments was Baht 2,026.18 million. A gain of Baht 26.43 million arose from the investment disposal.
36. Reclassification The Group has reclassified certain items in the consolidated and the Company’s financial statements for the year ended December 31, 2005 to conform to the presentation of the consolidated and the Company’s financial statements for the year ended December 31, 2006. The reclassifications do not affect the net income previously reported.
37. Promotional Privileges The Company received promotional privileges from the Board of Investments (BOI) under the Investment Promotion Act, B.E. 2520 for the Gas Separation Plant Unit 5 project, the Sai Noi - South Bangkok Power Plant gas transmission pipeline project, the third gas offshore and onshore transmission pipeline project, the Songkhla Power Plant gas transmission pipeline project, the District Cooling and Cogeneration at Future Park Rangsit project, the Ethane Separation Plant project, the Suvarnabhumi - Phayathai NGV gas distribution pipeline project, and the gas distribution pipelines to the Rojana Industrial Park project. The promotional privileges include exemption from import duties for the machinery approved by the BOI and exemption from corporate income tax for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues. The sales from the promotional and non-promotional business for the years ended December 31, 2006 and 2005 are detailed as follows:
The Company Unit : Million Baht Promotional business
2006
2005
38,014.36
28,692.51
Non-promotional business
1,149,017.93
938,407.30
Total
1,187,032.29
967,099.81
Some subsidiaries and joint ventures received promotional privileges from the BOI under the Investment Promotion Act, B.E. 2520. Details are as follows: PTTCH received promotional privileges for its business with respect to the production of chemicals from petroleum feedstock, the production and distribution of polyethylene, the public utility generation, the jetty services for the storage and handling of liquid products, and the marine shipment services at the Mab Ta Phut Industrial Estate, Rayong. The promotional privileges cover exemption from various taxes and duties, including exemption from corporate income tax for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues, and a 50% reduction from the normal rate of corporate income tax for the net income generated from investments for a period of five years from the expiry date of the corporate income tax exemption. HMC received promotional privileges for its business with respect to the production of chemicals from petroleum feedstock. The promotional privileges cover exemption from various taxes and duties, including exemption from corporate income tax for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues, and a 50% reduction from the normal rate of corporate income tax for the net income generated from investments for a period of five years from the expiry date of the corporate income tax exemption.
PTT Public Company Limited
197
PTTNGD received promotional privileges which include exemption from corporate income tax for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues and exemption from or a 100% reduction in import duties for the machinery approved by the BOI. TTM (T) received promotional privileges for its public utility and basic services business Category 7.1 and natural gas transmission pipeline business Category 7.7. The promotional privileges cover exemption from various taxes and duties, including exemption from corporate income tax not exceeding Baht 13,724 million for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues. The amount of tax exemption is adjusted in accordance with the investment amounts excluding land and effective working capital on the date of initial operation. The promotional privileges also include a 50% reduction from the normal rate of corporate income tax for the net income generated from investments for a period of five years from the expiry date of the corporate income tax exemption, and exemption from import duties for the machinery approved by the BOI. PTTUT received promotional privileges for its electricity, steam and water generation business. The promotional privileges cover exemption from corporate income tax for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues, a 50% reduction from the normal rate of corporate income tax for the net income generated from investments for a period of five years from the expiry date of the corporate income tax exemption, and exemption from import duties for the machinery approved by the BOI. DCAP received promotional privileges for its public utility and basic services business Category 7.1. The promotional privileges cover exemption from various taxes and duties, including exemption from corporate income tax. PPCL received promotional privileges for its phenol and acetone production business. The promotional privileges cover exemption from corporate income tax for the net income generated from the promotional business for a period of eight years from the date of initial recognition of operating revenues, a 50% reduction from the normal rate of corporate income tax for the net income generated from investments for a period of five years from the expiry date of the corporate income tax exemption, and exemption from import duties for the machinery approved by the BOI. With the receipt of promotional privileges, the Group must comply with all conditions and regulations stated in the Promotional Certificates.
38. Commitments and Contingent Liabilities 38.1 Commitments to subsidiaries, associates, joint ventures and other related companies are detailed as follows: According to a condition with a financial institution, the Company entered into two Shareholder’s Commercial Support Arrangements with its subsidiaries and associates with credit limits of USD 100 million and USD 90 million, respectively. The Company had obligations under the arrangements in the form of extended credit for raw materials and/or advance product payment. As of December 31, 2006, the subsidiaries and associates had not used the credit lines. The Company had an obligation with a subsidiary in a foreign country under a commercial credit agreement in the form of extended credit for raw materials with a credit limit of USD 100 million. As of December 31, 2006, the subsidiary had used a commercial credit line of USD 95.23 million. The outstanding credit line was USD 4.77 million or approximately Baht 172.82 million. The Company entered into agreements of financial support (Sponsor Support Agreements) with two joint ventures with a total credit limit equal to the loan obligations of the two joint ventures to a financial institution. As of December 31, 2006, the Company had outstanding commitments of USD 261.30 million or approximately Baht 9,467.11 million under these agreements. The Group had obligations under various Shareholder Agreements with respect to capital injections. As of December 31, 2006, the Group had total outstanding obligations under the agreements of Baht 16,395.73 million in the consolidated financial statements and Baht 4,063.77 million in the Company’s financial statements.
198
PTT Public Company Limited
38.2
As of December 31, 2006, the Group and the Company had contingent liabilities in the form of letters of guarantee amounting to Baht 871.44 million in the consolidated financial statements and Baht 161.71 million in the Company’s financial statements.
38.3
On August 31, 2006, the Foundation for Consumers and a group of five individuals (the “Claimants”) filed a complaint to the Supreme Administration Court, naming the Prime Minister, the Cabinet and the Minister of Energy as respondents (the “Respondents”), seeking the court to order to revoke two Royal Decrees issued under the Corporatization Act B.E. 2542 (A.D. 1999) in relation to the privatization of the Petroleum Authority of Thailand to PTT Public Company Limited. The two Royal Decrees were the Royal Decree Determining the Powers, Rights and Benefits of PTT Public Company Limited B.E. 2544 (A.D. 2001) and the Royal Decree Determining the Time for Repealing the Laws Governing the Petroleum Authority of Thailand B.E. 2544 (A.D. 2001). On September 4, 2006, the Supreme Administration Court issued an order to accept this complaint. The Respondents made a statement to the court, and the Claimants prepared a dispute over the Respondents’ statement and submitted it to the court in accordance with the procedures of the Administration Court. On January 22, 2007, the Respondents prepared and submitted an additional statement to the court. However, the Company filed a petition to act as a litigant in the lawsuit. On November 28, 2006, the Supreme Administration Court issued an order to permit the Company to act as a litigant. The lawsuit is currently under the consideration of the Supreme Administration Court.
39. Subsequent Events 39.1
On January 5, 2007, PTTEPI exercised its pre-emptive right to purchase an additional participation interest of 3.333334% in Cambodia Block B from CE Cambodia B Ltd. (CEL), resulting in an increase in its participation interest to 33.333334%. The joint venturers have offered to pay CEL USD 3.5 million by paying an upfront amount of USD 1 million after receiving approval from the Cambodian government. PTTEPI will be required to make payment for the remaining amount when the production reaches 100 million barrels of oil equivalent onwards.
39.2
On January 12, 2007, PTTEP incorporated PTTEP Thai Project Company Limited with authorized share capital of Baht 1 million, consisting of 100,000 ordinary shares at a par value of Baht 10 per share. PTTEP Thai Project Company Limited was wholly owned by PTTEP (Thailand) Limited (a subsidiary of PTTEP).
39.3
On January 16, 2007, PTTEPO was granted Cabinet approval to be the operator in concession Block A4/48, A5/48 and A6/48 with a 100% interest.
39.4
According to the resolution of the annual general meeting of PTTEP’s shareholders for the year 1998 to issue and offer debentures for a total amount up to Baht 10,000 million, PTTEP issued and offered Baht debentures totalling Baht 6,500 million. Consequently, the remaining balance from the approval was Baht 3,500 million for the next debenture issuance. On February 12, 2007, PTTEP issued and offered 3,500,000 unsecured unsubordinated debentures at a face value of Baht 1,000 each amounting to Baht 3,500 million. The interest is fixed at a rate of 4.88% per annum, payable every six months as of February 12 and August 12 of every year with a redemption period of three years, to be redeemed on February 12, 2010.
39.5
The board of directors of the Company approved these financial statements to be issued on February 23, 2007.
PTT Public Company Limited
199
AUDIT FEES OF THE AUDITORS
Audit Fees PTT and subsidiaries paid for the audit fees for the latest accounting period amounting to Baht 15,556,862 (Fifteen million, five hundred and fifty-six thousand, eight hundred and sixty-two Baht.)
200
PTT Public Company Limited
GLOSSARY OF TECHNICAL TERMS AN
Acrylonitrile
API
American Petroleum Institute
bbl or bbls
barrel (s)
bbl/d
barrel (s) per day
bcf
billion cubic feet
BOE
barrel of oil equivalent
BOED
barrel of oil equivalent per day
Btu
British thermal unit
B/MMbtu
Baht/Million Btu
BZ
Benzene
CHP
Combined Heat and Power
CNG
Compressed Natural Gas
DCSPP
District Cooling System Power Plant
DDF
Diesel Dual Fuel
EPPO
Energy Policy and Planning Office
GDC & Cogen
Gas District Cooling and Cogeneration
IPP
Independent Power Producer
JDA
Joint Development Area
Kbd or KBbl/d
thousand barrels per day
LNG
Liquefied Natural Gas
LPG
Liquefied Petroleum Gas
LPG CP
Liquefied Petroleum Gas Contact Price
MEG
Monoethylene glycol
MMA
Methyl Methacrylate
MMBOE
one million barrels of oil equivalent
MMcf
one million cubic feet
MMcf/d
one million cubic feet per day
NGL
Natural Gasoline
NGV
Natural Gas for Vehicles
PP
Polypropylene
PPP
Purchasing Power Parity
PQI
Product Quality Improvement Project
PTA
Purified Terephthalic Acid
PX
Paraxylene
Rt
Refrigerated ton
SPP
Small Power Producers
PTT Public Company Limited
201
AUDIT FEES OF THE AUDITORS
Audit Fees PTT and subsidiaries paid for the audit fees for the latest accounting period amounting to Baht 15,556,862 (Fifteen million, five hundred and fifty-six thousand, eight hundred and sixty-two Baht.)
200
PTT Public Company Limited
GLOSSARY OF TECHNICAL TERMS AN
Acrylonitrile
API
American Petroleum Institute
bbl or bbls
barrel (s)
bbl/d
barrel (s) per day
bcf
billion cubic feet
BOE
barrel of oil equivalent
BOED
barrel of oil equivalent per day
Btu
British thermal unit
B/MMbtu
Baht/Million Btu
BZ
Benzene
CHP
Combined Heat and Power
CNG
Compressed Natural Gas
DCSPP
District Cooling System Power Plant
DDF
Diesel Dual Fuel
EPPO
Energy Policy and Planning Office
GDC & Cogen
Gas District Cooling and Cogeneration
IPP
Independent Power Producer
JDA
Joint Development Area
Kbd or KBbl/d
thousand barrels per day
LNG
Liquefied Natural Gas
LPG
Liquefied Petroleum Gas
LPG CP
Liquefied Petroleum Gas Contact Price
MEG
Monoethylene glycol
MMA
Methyl Methacrylate
MMBOE
one million barrels of oil equivalent
MMcf
one million cubic feet
MMcf/d
one million cubic feet per day
NGL
Natural Gasoline
NGV
Natural Gas for Vehicles
PP
Polypropylene
PPP
Purchasing Power Parity
PQI
Product Quality Improvement Project
PTA
Purified Terephthalic Acid
PX
Paraxylene
Rt
Refrigerated ton
SPP
Small Power Producers
PTT Public Company Limited
201