29 Analysis of Operating Results and Financial Status 1. Analysis of Operating Results of EGAT and Its Subsidiaries Operating results of EGAT and its subsidiaries including associated company and joint venture for the year ended December 31, 2011 and 2010 are summarized as follows: Operating Results 2011 2010 Increase / (Decrease) Million Baht Million Baht Million Baht Percentage Revenue from sales and services 418,445.19 405,445.06 13,000.13 3.21 Revenue from electric energy sales 399,377.40 383,458.98 15,918.42 4.15 Revenue from sales of other goods and services 19,067.79 21,986.08 (2,918.29) (13.27) Cost of electric energy sales 348,519.16 330,316.70 18,202.46 5.51 Cost of sales of other goods and services 17,833.44 20,936.96 (3,103.52) (14.82) Gross profit 52,092.59 54,191.40 (2,098.81) (3.87) Other revenue 3,879.87 3,660.82 219.05 5.98 Income before expenses 55,972.46 57,852.22 (1,879.76) (3.25) Selling expenses (152.54) (115.43) (37.11) 32.15 Administrative expenses (16,207.49) (15,427.35) (780.14) 5.06 Other expenses (654.49) (38.77) (615.72) 1,588.14 Operating income 38,957.94 42,270.67 (3,312.73) (7.84) Share of profit from associated company and share of profit from jointly controlled entity of subsidiaries under the equity method 2,533.42 3,272.09 (738.67) (22.57) Income before financial cost and income tax 41,491.36 45,542.76 (4,051.40) (8.90) Financial cost (5,424.38) (4,457.36) (967.02) 21.69 Income tax (Part of subsidiaries) (1,822.21) (1,266.55) (555.66) 43.87 Net income before minority interest 34,244.77 39,818.85 (5,574.08) (14.00) Net income - Minority interest (2,426.04) (2,863.18) 437.14 (15.27) Net income - EGAT and its subsidiaries 31,818.73 36,955.67 (5,136.94) (13.90) For operating results in 2011, EGAT and its subsidiaries recorded a net income of Baht 31,818.73 million, a decrease of Baht 5,136.94 million or 13.90% from the year 2010. The analysis is as follows: 1.1 Analysis of revenue from electric energy sales For the year ended December 31, 2011, revenue from electric energy sales, which is the primary source of revenue of EGAT and its subsidiaries, amounted to Baht 399,377.40 million, increasing by Baht 15,918.42 million or 4.15% from Baht 383,458.98 million in 2010. The higher sales revenue was mainly attributable to an increase of Baht 0.127 in unit selling price from Baht 2.451 in 2010 to Baht 2.578 in 2011. However, compared with 2010, the growth of energy sales revenue decelerated in 2011 due to the lower electricity consumption caused by the severe flooding during the last quarter of the year. As a result, the volume of electric energy sales decreased 1,517.55 million kwh or 0.97% to 154,935.65 million kwh, compared with 156,453.20 million kwh in 2010.
30 Besides, its revenue from electric energy sales was partially reduced due to the resolution of the Energy Regulatory Commission (ERC) which stipulated EGAT to transfer the cross subsidies between power utilities amounting to Baht 3,384.45 million from EGAT s electric energy sales and to return the electricity charge by differential from actual investment and planning between the periods of 2008-2010 amounted to Baht 2,889.31 million. 1.2 Analysis of cost of electric energy sales In 2011, the cost of electric energy sales of EGAT and its subsidiaries increased from the year 2010 by Baht 18,202.46 million. Components of the cost of electric energy sales are detailed as follows: Cost of Electric Energy Sales 2011 2010 Increase Million Baht Million Baht Million Baht Percentage Electricity purchased 174,182.03 163,364.77 10,817.26 6.62 Fuel 133,014.68 129,936.86 3,077.82 2.37 Generating expenses 31,944.79 27,735.22 4,209.57 15.18 Transmission expenses 9,377.66 9,279.85 97.81 1.05 Total 348,519.16 330,316.70 18,202.46 5.51 1.2.1 Electricity purchased In 2011, the cost of purchased electricity increased by Baht 10,817.26 million or 6.62%. The increase was attributable to an increase of 2,710.17 million kwh or 3.76% in electricity purchase from private power producers amounting to 74,856.78 million kwh and the higher average power purchase price of Baht 2.327 per kwh, compared with Baht 2.264 per kwh in 2010. The significant details are as follows: Electricity purchased from Lao People s Democratic Republic increased by 3,765.61 million kwh or Baht 4,968.71 million due to the higher generation dispatch from Nam Theun 2 hydroelectric plant to substitute natural gas-fired generation during the interruption of natural gas supply from the Gulf of Thailand in July 2011. In addition, EGAT also started purchasing electricity from Nam Ngum 2 hydropower plant in March 2011. Electricity purchased from Independent Power (Thailand) Co.,Ltd. (IPT) increased by 2,943.81 million kwh or Baht 6,202.36 million compared with the prior year when the power plant had undergone a major overhaul from April 28 to November 30, 2010. Electricity purchased from Electricity Generating Plc. (EGCO) decreased by 2,656.11 million kwh or Baht 4,781.44 million because its old power plants were less efficient than all other combined cycle power plants and were thus put on reserve shutdown following the lower electricity demand in 2011. Electricity purchased from Tri Energy Co.,Ltd. decreased by 1,386.29 million kwh or Baht 2,146.25 million due to its longer maintenance outages than the prior year. 1.2.2 Fuel cost In 2011, the electricity produced by EGAT and its subsidiaries amounted to 84,224.60 million kwh, decreasing from the prior year by 4,069.09 million kwh. The details of fuel consumption are as follows:
31 Fuel 2011 2010 Increase / (Decrease) Million Unit Million Unit Million Unit Percentage Natural gas (MBtu) 458.14 533.39 (75.25) (14.11) Heavy oil (liter) 434.70 227.43 207.27 91.13 Diesel oil (liter) 11.65 18.12 (6.47) (35.68) Lignite (ton) 17.16 16.04 1.12 6.97 The fuel cost for the year ended December 31, 2011 amounted to Baht 133,014.68 million, increasing by Baht 3,077.82 million or 2.37%. The details of fuel cost are as follows: Fuel 2011 2010 Increase / (Decrease) Million Baht Million Baht Million Baht Percentage Natural gas 114,052.60 116,868.69 (2,816.09) (2.41) Heavy oil 9,257.81 3,988.86 5,268.95 132.09 Diesel oil 274.44 392.85 (118.41) (30.14) Lignite 9,429.83 8,686.46 743.36 8.56 Total 133,014.68 129,936.86 3,077.82 2.37 1.2.3 Electricity Generating Expenses For the year ended December 31, 2011, expenses for electricity generation increased by Baht 4,209.57 million. The increase was mainly attributable to an increase in depreciation of generation assets resulting from the increased assets under the power plant item. Also, major inspection expense and Pool Parts depreciation expense increased by Baht 860.00 million and Baht 501.00 million respectively. In addition, maintenance expense in electricity generation increased by Baht 1,015.47 million. 1.3 Revenue and cost of sales of other goods and services Revenue and cost of sales of other goods and services were mainly derived from fuel supplies sold at cost to EGAT s subsidiaries as well as such other services rendered to external companies as operation and maintenance services, engineering and construction consulting services, and telecommunication services. In 2011, EGAT and its subsidiaries recorded the revenue from sales of other goods and services in the amount of Baht 19,067.79 million, decreasing from the year 2010 by Baht 2,918.29 million or 13.27% mainly due to a decrease of Baht 2,052.27 million in the revenue from sales of natural gas and heavy oil to its subsidiaries. In 2011, the cost of sales of other goods and services totaled Baht 17,833.44 million, decreasing from the year 2010 by Baht 3,103.53 million or 14.82%. 1.4 Administrative expenses Administrative expenses for the year ended December 31, 2011 amounted to Baht 16,207.49 million, increasing from the prior year by Baht 780.14 million or 5.06%. This was mainly because of an increase of Baht 208.55 million in EGAT s salary expenses resulting from an annual pay raise. In addition, the consulting service expenses of Baht 235.98 million of Ratchaburi Electricity Generating Holding Plc in purchasing the securities of TSIF Fund also contributed to the higher administrative expenses in 2011.
32 1.5 Share of profit from associated company of EGAT and share of profit from jointly controlled entities of subsidiaries by using the equity method For the year ended December 31, 2011, share of profit under the equity method totaled Baht 2,533.41 million, decreasing from the year 2010 by Baht 738.68 million or 22.58% due to the following reasons. Share of profit from EGAT s associated company decreased by Baht 629.14 million, mainly resulting from a decrease of Baht 628.64 million in share of profit from Electricity Generation Plc. Share of profit from jointly controlled entities of subsidiaries decreased by Baht 109.54 million due to the impact of foreign exchange rate. Excluding the effect of foreign exchange rate, the overall operation of jointly controlled entities of subsidiaries increased from the prior year by Baht 273.83 million owing to the commercial operation of Nam Ngum 2 Power Plant which had started since March 26, 2011. 1.6 Financial cost For the year ended December 31, 2011, financial cost amounted to Baht 5,424.38 million, an increase of Baht 967.02 million or 21.69%. The increase was mainly attributable to an increase of Baht 1,222.40 million in the financial cost of Ratchaburi Electricity Generating Holding Plc for Ratchaburi Electricity Generating Co.,Ltd. s issue and offer for sale of bond and bill of exchange for wholly repayment of the old loans, and the financial cost of Baht 1,021.52 million of RATCH-Australia, offset by a decrease of Baht 259.16 million in EGAT s financial cost resulting from the repayment of long-term loans during the year. 1.7 Income tax For the year ended December 31, 2011, the income tax of its subsidiary, namely Ratchaburi Electricity Generating Holding Plc. amounted to Baht 1,822.21 million, increasing from the year 2010 by Baht 555.66 million or 43.87% as all three sets of combined cycle power plants of the company have been liable to income tax payment since April 18, 2010 following the expiration of corporate income tax exemption granted by the Board of Investment of Thailand (BOI). 2. Analysis of Financial Status of EGAT and Its subsidiaries Financial Status 2011 2010 Increase Million Baht Million Baht Million Baht Percentage Total assets 495,534.27 469,680.82 25,853.45 5.50 Total liabilities 193,204.49 185,006.40 8,198.09 4.43 Equity of EGAT 275,128.53 258,709.50 16,419.03 6.35 Minority interest 27,201.25 25,964.91 1,236.34 4.76 As at December 31, 2011, the total assets of EGAT and its subsidiaries increased by Baht 25,853.45 million mainly due to the following reasons.
33 An increase in cash and cash equivalents of Baht 3,469.21 million, mainly from an increase in EGAT s current and saving accounts and fixed deposit receipt of subsidiaries of Baht 10,687.82 million and Baht 1,210.00 million respectively, offset by a decrease of Baht 5,108.26 million in EGAT s government bonds not exceeding 3 months and a decrease of Baht 3,249.58 million in its subsidiaries bill of exchange A decrease in temporary investment of Baht 6,789.11 million, largely from a decrease of Baht 17,369.26 million in the government bonds over 3 months, offset by an increase of Baht 9,980.26 million in EGAT s fixed deposit. An increase in investment in associated company and jointly controlled entities of subsidiaries by using equity method of Baht 3,737.14 million resulting from the operating results recognition and the increasing investment during the year as follows: Unit: Million Baht Increase / (Decrease) Associated Companies Electricity Generating Plc. 734.80 First Korat Wind Co.,Ltd. 203.18 K.R. Two Co.,Ltd. 153.38 Jointly-Controlled Entities Tri Energy Co.,Ltd. 243.27 Ratchaburi Power Co.,Ltd. 40.07 Chubu Ratchaburi Electric Services Co.,Ltd. (4.01) SouthEast Asia Energy Ltd. 373.40 Hongsa Power Co.,Ltd. (38.49) Phufai Mining Co.,Ltd. (0.07) Nam Ngum 3 Hydro Electric Power Co.,Ltd. (0.07) Nava Nakorn Electricity Generation Co.,Ltd. 30.65 Ratchaburi World Cogeneration Co.,Ltd. 146.49 Solarta Co.,Ltd. 551.75 Solar Power (Korat 3) Co.,Ltd. 56.61 Solar Power (Korat 4) Co.,Ltd. 59.14 Solar Power (Korat 7) Co.,Ltd. 44.94 Songkha Biomass Co.,Ltd. 16.90 Perth Power Partnership (RATCH-Australia s jointly controlled entity) 1,125.20 Net property, plant and equipment increased by Baht 10,527.07 million as the assets of EGAT and its subsidiaries increased during the year, mainly from an increase of Baht 8,150.98 million in EGAT s assets under the category of power plant and an increase of Baht 1,328.75 million in deferred charges for major plant inspection. An increase of Baht 2,478.54 million in intangible assets resulted mainly from the subsidiary s project development right amounting to Baht 1,752.64 million.
34 As at December 31, 2011, the total liabilities of EGAT and its subsidiaries increased by Baht 8,198.09 million, detailed as follows: Account payables increased by Baht 7,508.80 million, mostly from an increase in account payable cost of electricity purchase from independent power producers and small power producers amounting to Baht 4,729.96 million and 1,766.14 million respectively. The accrued remittance to the Ministry of Finance decreased by Baht 1,603.85 million due to EGAT s lower net income compared with the prior year. Since 2010 EGAT has made provisions for the remittance at the rate of 45% of net income as stipulated by the Ministry of Finance, against the normal rate of 40%. Long-term loans and current portion of long-term loans increased by Baht 2,457.79 million, due to the issue of JPY 15,000 million (Baht 17,478.35 million) bonds of RH International (Singapore) Corporation Pte. Ltd. which is a subsidiary of Ratchaburi Electricity Generating Holding Plc, offset by the repayment of EGAT s long term loans (EGAT s bonds) amounting to Baht 16,014.10 million during the year 2011. Equity of EGAT and its subsidiaries excluding minority interests totaled Baht 275,128.53 million, increasing by Baht 16,419.02 million, as shown in the following details. For the year ended December 31, 2011 the net income of EGAT and its subsidiaries were Baht 31,818.73 million. EGAT wrote off the depreciation of multi-purpose dams in the portion of their irrigation purposes, resulting in a decrease of Baht 62.33 million in the Contribution from the Government. Adjustment for increase in the share of equity in subsidiaries and associates by using the equity method in the amount of Baht 110.15 million. Accrued common shares from other joint ventures in EGAT s jointly controlled entity, namely District Cooling System and Power Plant Co.,Ltd. amounted to Baht 23.62 million. Remittance to the Ministry of Finance for the amount of Baht 15,471.15 million 3. Analysis of Cash flow As at December 31, 2011, cash and cash equivalents of EGAT and its subsidiaries amounted to Baht 51,338.83 million, increasing from December 31, 2010 by Baht 3,469.22 million. The details of cash flows from each activity are as follows: Unit : Million Baht Cash and cash equivalents as at December 31, 2010 47,869.61 Net cash inflows from operating activities 61,099.99 Net cash outflows from investing activities (16,638.23) Net cash inflows from financing activities (41,065.08) Effects from foreign exchange rate in cash and cash equivalents 72.54 Cash and cash equivalents as at December 31, 2011 51,338.83
35 In 2011, net cash inflows from operating activities totaled Baht 61,099.99 million which was derived from net income of Baht 31,818.73 million, adjusted by non-cash items in statements of income, such as depreciation and gains (losses) on foreign exchange etc. totaling Baht 65,021.06 million. Besides, changes in working capital resulted in a decrease in cash of Baht 2,623.61 million, cash receipts on interest of Baht 583.52 million and cash payment on income tax totaling Baht 1,880.98 million. Net cash outflows from investing activities amounted to Baht 16,638.23 million, mainly consisting of investments for the construction of combined cycle power plant projects, transmission system, and construction projects and durable goods totaling Baht 19,423.35 million, the payment for acquisition of subsidiaries amounting to Baht 6,188.68 million, and the payment for additional share capital in associated company and the jointly controlled entities of subsidiaries totaling Baht 1,335.79 million. Meanwhile, EGAT and its subsidiaries received cash on temporary investments of Baht 6,841.98 million, interest of Baht 1,241.42 million and dividends of Baht 1,525.26 million. Net cash outflows from financing activities totaled Baht 41,065.08 million, comprising of cash receipts from short- and long-term loans of Baht 32,905.64 million, accrued common shares of Baht 23.63 million, repayment of loans and interest of Baht 55,124.97 million, remittance to the Ministry of Finance of Baht 17,075.00 million and dividend payment to minority from subsidiaries of Baht 1,794.38 million.
36 4. Financial Ratio Based on the operating results and financial status for the year ended December 31, 2011 and 2010, the financial ratios of EGAT and its subsidiaries are as follows: 2011 2010 Liquidity Ratio Current ratio (Time) 1.51 1.62 Quick ratio (Time) 1.36 1.47 Cash ratio (Time) 0.77 0.73 Profitability Ratio Ratio of gross profit to net sales (Percentage) 12.45 13.37 Ratio of net profit to net sales (Percentage) 7.60 9.11 EBITDA (Million Baht) 63,360.03 58,723.25 Efficiency Ratio Rate of return on assets (Percentage) 6.59 7.83 Rate of return on fixed assets (Percentage) 20.32 22.04 Total assets turnover (Time) 0.88 0.87 Financial Policy Ratio Debt to equity ratio (Time) 0.64 0.65 Times interest earned (Time) 7.65 10.22 Fixed charge coverage (cash basis) (Time) 0.90 1.38 Remark : Source: EBITDA is calculated from gross profit after selling expenses, administrative expenses and management benefits expense, excluding depreciation and other amortization expenses. The data on energy generation and purchase is based on the Preliminary Yearly Operation Report 2011 of EGAT s System Control and Operation Division issued in February 2012.