Analysis of Operating Results and Financial Status

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 jointly controlled entity for the years ended December 31, 2012 and 2011 are summarized as follows: 2012 2011 Increase/(Decrease) Operating Results Million Baht Million Baht Million Baht Percentage Revenue from sales and services 512,991.89 418,445.19 94,546.70 22.59 Revenue from electric energy sales 486,243.70 399,377.40 86,866.30 21.75 Revenue from sales of other goods and services 26,748.19 19,067.79 7,680.40 40.28 Cost of electric energy sales 430,191.42 348,625.41 81,566.01 23.40 Cost of sales of other goods and services 25,311.68 17,833.44 7,478.24 41.93 Gross profit 57,488.79 51,986.34 5,502.45 10.58 Other revenue 6,114.57 3,879.88 2,234.69 57.60 Income before expenses 63,603.36 55,866.22 7,737.14 13.85 Selling expenses 131.85 152.54 (20.69) (13.56) Administrative expenses 17,568.48 15,986.95 1,581.53 9.89 Other expenses 96.23 809.64 (713.41) (88.11) Operating income 45,806.80 38,917.09 6,889.71 17.70 Share of profit from associated company and share of profit from jointly controlled entity of subsidiaries under the equity method 3,695.46 2,533.42 1,162.04 45.87 Income before financial cost and income tax 49,502.26 41,450.51 8,051.75 19.42 Financial cost 5,343.21 5,341.69 1.52 0.03 Income tax (part of subsidiaries) 887.23 1,853.16 (965.93) (52.12) Net income for the year 43,271.82 34,255.66 9,016.16 26.32 Net income - Non-controlling interests 4,480.15 2,433.01 2,047.14 84.14 Net income - EGAT and its subsidiaries 38,791.67 31,822.65 6,969.02 21.90 For operating results in 2012, EGAT and its subsidiaries recorded a net income of Baht 38,791.67 million, an increase of Baht 6,969.02 million or 21.90% from the year 2011. The analysis is as follows: 22

1.1 Analysis of revenue from electric energy sales For the year ended December 31, 2012, revenue from electric energy sales, which was the primary source of revenue of EGAT and its subsidiaries, amounted to Baht 486,243.70 million, increasing by Baht 86,866.30 million or 21.75% from Baht 399,377.40 million in 2011. The higher sales revenue was mainly attributable to an increase of Baht 0.298 in unit selling price from Baht 2.571 in 2011 to Baht 2.869 in 2012, while electricity consumption increased. The volume of electric energy sales of EGAT and subsidiaries for the year 2012 increased by 14,170.90 million kwh or 9.12% to 169,496.23 million kwh, compared with 155,325.33 million kwh in 2011 which had been adjusted from the previous report. This was because the severe flooding during the last quarter of the year 2011 had eased up, electricity consumption in the year 2012 returned to normal, consumption and investment had improved, household population and entrepreneur of private sector restored dwellings and equipments, and industrial sector could return to operate. Besides, the summer started since the last week of February 2012. Therefore, electricity consumption in the year 2012 increased. Besides, EGAT s revenue from electric energy sales in 2012 was reduced in the amount of Baht 5,110.25 million because EGAT had to transfer the cross subsidies between power utilities amounting to Baht 3,688.45 million and to return the electricity charge by differential from actual investment and planning between the periods of 2008-2010 amounted Baht 1,421.80 million. 1.2 Analysis of cost of electric energy sales In 2012, the cost of electric energy sales of EGAT and its subsidiaries increased from the year 2011 by Baht 81,566.01 million. Components of the cost of electric energy sales are detailed as follows: 2012 2011 Increase (decrease) Cost of Electric Energy Sales Million Baht Million Baht Million Baht Percentage Electricity purchased 209,206.82 174,182.03 35,024.79 20.11 Fuel 176,240.28 133,014.68 43,225.60 32.50 Generating expenses 34,962.81 32,051.04 2,911.77 9.08 Transmission expenses 9,781.51 9,377.66 403.85 4.31 Total 430,191.42 348,625.41 81,566.01 23.40 Long-lasting friendship...sustainable energy 23

1.2.1 Electricity purchased In 2012, the cost of electricity purchased increased by Baht 35,024.79 million or 20.11%. The increase was attributable to an increase of 5,508.54 million kwh or 7.36% in electricity purchased from private power producers amounting to 80,365.32 million kwh, and the higher average power purchase price of Baht 2.603 per kwh increased by Baht 0.276 per kwh, compared with Baht 2.327 per kwh in 2011. The significant details are as follows: Electricity purchased from Electricity Generating Plc. (EGCO) increased by 1,877.50 million kwh or Baht 5,509.82 million because the demand for electricity was higher than the prior year, and PTT s eastern gas supply was higher than the prior year. Therefore, the company increased in purchasing power from intermediate plants which could unlock and parallel the power plant to the system instantly to support the electricity demand. Electricity purchased from Global Power Synergy Co., Ltd. (As formerly, Independent Power (Thailand) Co.,Ltd.) increased by 372.20 million kwh or Baht 2,409.09 million due to generation availability from a decrease in reserved shutdown from the prior year. Electricity purchased from Gulf Power Generation Co., Ltd. increased by 2,015.95 million kwh or Baht 6,973.39 million because its power plant was available to increase production to support the demand. Electricity purchased from GHECO-One Co.,Ltd. increased by 2,749.94 million kwh or Baht 6,770.29 million due to the fact that the company started to commercial trade on July 26, 2012 and first synchronize on November 1, 2012. However, the company was under test-run in the prior year. Electricity purchased from small power producers increased by 120.11 million kwh or Baht 7,449.24 million due to an increase of purchasing power from non-firm because there was generation availability and an increase in commercial operation from 4 producers. 1.2.2 Fuel cost In 2012, the electricity produced by EGAT and its subsidiaries amounted to 93,005.31 million kwh, increasing from the prior year by 8,780.71 million kwh. The details of fuel consumption are as follows: 2012 2011 Increase / (Decrease) Fuel Million Unit Million Unit Million Unit Percentage Natural gas (MBtu) 525.86 458.14 67.72 14.78 Heavy oil (liter) 500.43 434.70 65.73 15.12 Diesel oil (liter) 28.57 11.65 16.92 145.24 Lignite (ton) 16.78 17.16 (0.38) (2.21) The fuel cost for the year ended December 31, 2012 amounted to Baht 176,240.28 million, increasing by Baht 43,225.60 million or 32.50%. The details of fuel cost are as follows: 24

2012 2011 Increase / (Decrease) Fuel Million Baht Million Baht Million Baht Percentage Natural gas 154,417.50 114,052.60 40,364.90 35.39 Heavy oil 11,905.41 9,257.81 2,647.60 28.60 Diesel oil 685.29 274.44 410.85 149.70 Lignite 9,232.08 9,429.83 (197.75) (2.10) Total 176,240.28 133,014.68 43,225.60 32.50 1.2.3 Electricity Generating Expenses For the year ended December 31, 2012, expenses for electricity generation increased by Baht 2,911.77 million. The increase was mainly attributable to an increase in depreciation of generation assets under the power plants, and equipments for power plants items increased by Baht 1,098.13 million and Baht 644.74 million respectively. In addition, maintenance expenses in electricity generation increased by Baht 465.65 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; such other services rendered to external companies as operation and maintenance services, engineering and construction consulting services, and telecommunication services. In 2012, EGAT and its subsidiaries recorded the revenue from sales of other goods and services in the amount of Baht 26,748.19 million, increasing from the year 2011 by Baht 7,680.40 million or 40.28%, and the cost from sales of other goods and services in the amount of Baht 25,311.68 million, increasing from the year 2011 by Baht 7,478.24 million or 41.93%, mainly due to an increase of Baht 7,603.86 million and Baht 471.90 million in the revenue from sales and cost of natural gas and heavy oil to its subsidiaries. 1.4 Other revenue Other revenue for the year ended December 31, 2012 amounted to Baht 6,114.56 million, increasing from the prior year by Baht 2,234.68 million or 57.60%, mostly caused from following reasons. Gain from power purchase agreement cancellation of Collinsville power plant of Ratchaburi Electricity Generating Holding Plc. to get the compensation from the cancellation in the amount of Baht 1,069.44 million. Gain on disposal of long-term investment from share offering 14% of Loy Yang A power plant which is indirect subsidiary of Ratchaburi Electricity Generating Holding Plc. in the amount of Baht 783.68 million. Dividend income increased in the amount of Baht 128.25 million. Long-lasting friendship...sustainable energy 25

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, 2012, share of profit under the equity method totaled Baht 3,695.46 million, increasing from the year 2011 by Baht 1,162.05 million or 45.87% which consisted of share of profit from associated company increasing by Baht 1,726.75 million, and share of profit from jointly controlled entity decreasing by Baht 564.70 million. 1.6 Income tax For the year ended December 31, 2012, the income tax of its subsidiary, namely Ratchaburi Electricity Generating Holding Plc. amounted to Baht 887.23 million, decreasing from the year 2011 by Baht 965.93 million or 52.12% due to a decrease in corporate income tax rate from 30% to 23%. 2. Analysis of Financial Positions of EGAT and its Subsidiaries 2012 2011 Increase / (Decrease) Financial Status Million Baht Million Baht Million Baht Percentage Total assets 534,121.76 496,977.04 37,144.72 7.47 Total liabilities 208,316.15 194,773.93 13,542.22 6.95 Equity of EGAT and subsidiaries 295,700.43 275,132.79 20,567.63 7.48 Non-controlling interests 30,105.18 27,070.32 3,034.86 11.21 As at December 31, 2012, the total assets of EGAT and its subsidiaries increased by Baht 37,144.72 million mainly due to the following reasons. A decrease in cash and cash equivalents of Baht 10,694.63 million, mainly from a decrease in its subsidiaries bill of exchange of Baht 17,840.00 million and an increase in current and saving accounts of EGAT and subsidiaries of Baht 6,651.59 million. An increase of Baht 11,341.78 million in accounts receivable, largely from an increase of Baht 3,304.51 million and Baht 8,039.42 million from Metropolitan Electricity Authority and Provincial Electricity Authority respectively. An increase of Baht 10,635.34 million, largely from investment of EGAT in fixed deposits more than 12 months of Baht 10,005.34 million. An increase in investment in associated company and jointly controlled entities of subsidiaries by using equity method of Baht 3,404.18 million resulting from the operating results recognition and the increasing investment during the year as follows: 26

Associated Companies Unit : Million Baht Increase (Decrease) Electricity Generating Plc. 2,557.59 First Korat Wind Co.,Ltd. 172.08 K.R. Two Co.,Ltd. 152.40 2,882.07 Jointly-Controlled Entities Tri Energy Co.,Ltd. (181.94) Ratchaburi Power Co.,Ltd. 376.61 Chubu Ratchaburi Electric Services Co.,Ltd. 16.55 SouthEast Asia Energy Ltd. 224.57 Hongsa Power Co.,Ltd. (372.62) Phufai Mining Co.,Ltd. (0.06) Nam Ngum 3 Hydro electric Power Co.,Ltd. (0.04) Nava Nakorn Electricity Generation Co.,Ltd. 55.59 Ratchaburi World Cogeneration Co.,Ltd. 340.39 Solarta Co.,Ltd. 54.80 Solar Power (Korat 3,4,7) Co.,Ltd. 58.88 Songkhla Biomass Co.,Ltd 15.46 Songkhla Biofuel Co.,Ltd.q 0.39 KK Power Co.,Ltd. 15.16 Xae Pien - Xae Nam Noi Co.,Ltd. (0.98) Sukhothai Energy Co.,Ltd. 24.27 Perth Power Partnership (Kwinana) (105.02) 522.11 Total 3,404.18 Net property, plant, and equipment decreased by Baht 4,538.34 million as the assets of EGAT and its subsidiaries increased during the year of Baht 21,508.34 million, mainly from EGAT s power plant equipments and transmission system. On the contrary, depreciation expense for the year amounted to Baht 24,810.16 million. An increase of Baht 20,869.53 million resulted mainly from investment in the Wang Noi combined power plant construction project Block 4. As at December 31, 2012, the total liabilities of EGAT and its subsidiaries increased by Baht 13,542.22 million, mainly detailed as follows: Account payables increased by Baht 11,569.58 million, mostly from an increase in account payable cost of electricity purchased from local electricity purchased payable and fuel amounting to Baht 6,453.91 million and Baht 3,434.22 million respectively. Long-lasting friendship...sustainable energy 27

The accrued remittance to the Ministry of Finance increased by Baht 1,034.31 million, due to EGAT s higher net income compared with the prior year. Long-term loans and current portion of long-term loans decreased by Baht 13,904.88 million, due to repayment of EGAT s long term loans amounting to Baht 23,751.96 million, offset by long term loans withdrawal amounting to Baht 11,147.35 million. Other non-current liabilities increased by Baht 4,139.93 million, mostly from an increase in retention from EGAT s contractors amounting to Baht 4,174.78 million. Equity of EGAT and its subsidiaries totaled Baht 295,700.43 million, increasing by Baht 20,567.63 million, as shown in the following details. For the year ended December 31, 2012, the net income of EGAT and its subsidiaries totaled Baht 38,791.67 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. A decrease in other comprehensive income under other components of equity in the amount of Baht 830.40 million. Remittance to the Ministry of Finance for the amount of Baht 17,331.31 million 3. Analysis of Cash flow As at December 31, 2012, cash and cash equivalents of EGAT and its subsidiaries amounted to Baht 40,644.20 million, decreasing from December 31, 2011 by Baht 10,694.63 million. The details of cash flows from each activity are as follows: Unit : Million Baht Cash and cash equivalents as at December 31, 2011 51,338.83 Net cash inflows from operating activities 61,129.74 Net cash outflows from investing activities (35,193.67) Net cash inflows from financing activities (36,603.87) Effects from foreign exchange rate in cash and cash equivalents (26.83) Cash and cash equivalents as at December 1202,13 40,644.20 In 2012, net cash inflows from operating activities totaled Baht 61,129.74 million which was derived from net income of Baht 38,791.67 million, adjusted by non-cash items in statements of income, such as depreciation and gains (losses) on foreign exchange etc. totaling Baht 71,286.51 million. Besides, changes in working capital resulted in a decrease in cash of Baht 9,427.11 million, cash receipts on interest of Baht 912.70 million, and cash payment on income tax totaling Baht 1,642.36 million. 28

Net cash outflows from investing activities amounted to Baht 35,193.67 million, mainly consisting of investments for the construction of combined cycle power plant projects, transmission system, and construction projects and durable goods including interests totaling Baht 31,043.10 million, and the payment for additional share capital in associated company and the jointly controlled entities of subsidiaries totaling Baht 849.79 million. Meanwhile, EGAT and its subsidiaries received cash on power purchase agreement cancellation of Baht 3,167.37 million, interest of Baht 743.61 million, and dividends of Baht 1,698.53 million. Net cash outflows from financing activities totaled Baht 36,603.87 million, comprising of cash receipts from short- and long-term loans of Baht 27,987.35 million, accrued common shares of Baht 34.93 million, repayment of loans and interest of Baht 43,272.77 million, remittance to the Ministry of Finance of Baht 16,297.00 million, and dividend paid of Baht 5,056.38 million. 4. Financial Ratio Based on the operating results and financial positions for the year ended December 31, 2012 and 2011, the financial ratios of EGAT and its subsidiaries are as follows: Liquidity Ratio 2012 2011 Current ratio (Time) 1.42 1.51 Quick ratio (Time) 1.29 1.36 Cash ratio (Time) 0.70 0.81 Profitability Ratio Ratio of gross profit to net sales (Percentage) 11.21 12.42 Ratio of net profit to net sales (Percentage) 8.44 8.19 EBITDA (Million Baht) 70,321.12 63,361.17 Efficiency Ratio Rate of return on assets (Percentage) 8.39 7.09 Rate of return on fixed assets (Percentage) 25.11 21.24 Total assets turnover (Time) 1.01 0.88 Financial Policy Ratio Debt to equity ratio (Time) 0.64 0.64 Times interest earned (Time) 9.26 7.76 Fixed charge coverage (cash basis) (Time) 1.10 1.67 Remark: EBITDA is calculated from gross profit after selling expenses, administrative expenses, excluding depreciation and other amortization expenses. Long-lasting friendship...sustainable energy 29