Gulf Energy Development Public Company Limited

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Management Discussion and Analysis of the Company s Performance For the Three Months Ended March 31, 2018 The Management Discussion and Analysis of the Company s Performance (the MD&A ) is intended

1 Management Discussion and Analysis of the Company s Performance For the Three Months Ended March 31, 2018 The Management Discussion and Analysis of the Company s Performance (the MD&A ) is intended to present and analyze the Company s results of operations and financial position as at the end of the accounting period. Such information may change in the future. The MD&A is primarily prepared in Thai. In case that the content in the translation contains any conflict or is interpreted differently from the Thai version, the Thai version shall prevail. If you have any questions or queries, please contact our Investor Relations Department: Tel: +66 (0) or ir@gulf.co.th

2 Definition Company Group EDL-Gen EGAT GCG GJP GMP GNC GNS GTS1 GTS2 GTS3 GTS4 Gulf Solar The Company, its subsidiaries, its associates and its joint ventures EDL-Generation Public Company The Electricity Generating Authority of Thailand Gulf Chana Green Company Limited, a subsidiary in which the Company has a 99.99% equity interest Gulf JP Company Limited, an associate in which the Company has a 40.0% equity interest Gulf MP Company Limited, a subsidiary in which the Company has a 70.0% equity interest Gulf NC Co., Ltd., a power project operator under the subsidiary GMP Gulf JP NS Co., Ltd., a power project operator under the associate GJP Gulf TS1 Co., Ltd., a power project operator under the subsidiary GMP Gulf TS2 Co., Ltd., a power project operator under the subsidiary GMP Gulf TS3 Co., Ltd., a power project operator under the subsidiary GMP Gulf TS4 Co., Ltd., a power project operator under the subsidiary GMP Gulf Solar Co., Ltd., a subsidiary in which the Company has a 74.99% equity interest Gulf WHA MT Gulf WHA MT Natural Gas Distribution Co., Ltd., a joint venture in which the Company has a 35.0% equity interest GUT GVTP Gulf JP UT Co., Ltd., a power project operator under the associate GJP Gulf VTP Co., Ltd., a power project operator under the subsidiary GMP IPD Independent Power Development Company Limited, a subsidiary in which the Company has a 70.0% equity interest IPP MITG Mitsui PEA SPP TFRIC 4 WHA WHAUP Independent Power Producer in which capacity sold to EGAT is more than 90 megawatts MITG (Thailand) Limited, an equally held joint venture company between Mitsui & Co., Ltd. and Tokyo Gas Asia Pte., Ltd. Mitsui & Co., Ltd. The Provincial Electricity Authority Small Power Producer in which capacity sold to EGAT is more than 10 megawatts but not more than 90 megawatts Revenue recognition standard applied for the IPPs under GJP to record revenue from availability payment as income from financial lease WHA Corporation Public Company Limited, together with its consolidated subsidiaries WHA Utilities & Power Public Company Limited 1

3 1. Overview of the Group s Performance for the Three Months Ended March 31, 2018 Two power projects commenced commercial operations Two gas- fired SPPs under the subsidiary GMP commenced commercial operations and began recognizing revenue from electricity sold to EGAT and revenue from electricity and steam sold to industrial users. Power project Commercial operation date Quarter to begin revenue recognition GTS4 January 1, 2018 Quarter 1 GNC March 1, 2018 Quarter 1 Increase of shareholding in the joint venture Gulf WHA MT The Company partnered with WHAUP to invest in Gulf WHA MT, a joint venture established to operate gas distribution business serving industrial users in industrial estates owned by the WHA Group. Gulf WHA MT s two natural gas distribution projects are under construction and expected to commence commercial operations in 2018 and On January 29, 2018, MITG joined in the partnership, holding 30.0% in Gulf WHA MT. The Company s shareholding was consequently reduced from 49. 0% to 35. 0%, while WHAUP s shareholding was reduced from 51.0% to 35.0%. Debt repayment and reduction of guarantee fee for the outstanding debenture In January 2018, the Company paid off loans from financial institutions amounting to a principal of 1,000 million baht, so there was no long-term loan in the separate financial information. As of March 31, 2018, the Company only had a debenture amounting to 6,000 million baht, due in Moreover, the Company negotiated with the debenture s guarantors to lower the guarantee fee, resulting in a reduction of the financing cost to 3.25%, effective from February 2018 onwards. IPD s issuance of a preferred share to yield an additional 5.0% dividend to the Company On March 30, 2018, an extraordinary shareholders meeting of the subsidiary IPD approved an increase in the registered capital through the issuance of a preferred share at a par value of baht for the Company and the share was fully paid up for an amount of 10.0 baht on that date. This transaction was to entitle the Company to an additional 5. 0%, or a total of 75. 0%, of the dividends paid from IPD in accordance with the shareholder agreement. The subsidiary GCG entered into long- term loan agreements with financial institutions and engineering, procurement and construction contracts with contractors On February, 16, 2018, GCG entered into long- term loan agreements with financial institutions for baht- denominated lendings of 1, million baht and also entered into engineering, procurement and construction contracts with contractors on the same date. The first drawdown of the lendings was completed on March 16,

4 2. Analysis of the Group s Results of Operations for the Three Months Ended March 31, 2018 The table compares the Group s results of operations in accordance with the consolidated financial information for the three months ended March 31, 2018 and For the three months ended March 31 Change M. Baht M. Baht M. Baht % Revenue from sales 3, , ,688.4 Revenue from management fee Cost of sales (2,484.3) (1.2) 2, ,246.1 Cost of management fee (45.7) (52.5) (6.8) (13.0) Gross profit (9.4) N.A. Other income Interest income ,711.1 Share of net profit from an associate and a joint venture 1, , Administrative expenses (230.2) (138.0) (92.2) 66.8 Finance costs (470.3) (282.5) (187.8) 66.5 Corporate income tax benefits (expenses) (26.3) (87.5) Profit before effects from exchange rate 1, Gains (losses) on exchange rate, net Profit for the period 2, , Profit attributable to owners of the parent 1, ,

5 2017. The table compares the Group s revenue structure for the three months ended March 31, 2018 and Revenue from electricity sold to EGAT and PEA Revenue from electricity sold to industrial users Revenue from steam sold to industrial users For the three months ended March 31 Change M. Baht % M. Baht % M. Baht % 2, , , N.A N.A. Revenue from management fee Share of net profit from an associate and a joint venture 1, , Interest income ,711.1 Other income Gains (losses) on exchange rate, net Total revenues 5, , , The table shows the volume of electricity and steam sold by the SPPs under the subsidiary GMP for the three months ended March 31, Power project Commercial operation date Volume of electricity sold Volume of steam sold EGAT Industrial users Industrial users M. Baht M. Baht Gigawatthour Gigawatthour Gigawatthour M. Baht GVTP May 16, , GTS1 Jul 8, , GTS2 Sep 1, , GTS3 Nov 1, , GTS4 Jan 1, , GNC Mar 1, , Total , ,

6 Revenue from sales Revenue from sales for the three months ended March 31, 2018 was 3,360.6 million baht, an increase from 1. 8 million baht in previous year due to the revenue recognition from sales of electricity to EGAT and from sales of electricity and steam to industrial users of six power projects under GMP, gradually commencing their commercial operations. Five power projects, namely the GVTP, GTS1, GTS2, GTS3 and GTS4 power projects, recognized revenue for the whole quarter, while another project, namely GNC, just began recognizing its revenue for one month. For the three months ended March 31, 2017, only revenue from sales of electricity of Gulf Solar was recognized. Revenue from management fee Revenue from management fee for the three months ended March 31, 2018 was 75.0 million baht, an increase of million baht or 76. 5% as the Company and GJP agreed to amend the structure of their Secondment Agreement by entering into another agreement, the Major Maintenance Service Agreement for the power projects under GJP at the end of 2017, resulting in an increase in the management fee. The table compares the Group s cost of sales of electricity and steam for the three months ended March 31, 2018 and For the three months ended March 31 Change M. Baht % M. Baht % M. Baht % Cost of sales 2, , ,246.1 Cost of management fee (6.8) (13.0) Total 2, , ,607.3 Cost of sales and service Cost of sales and service for the three months ended March 31, 2018 was 2,484.3 million baht, an increase from 1.2 million baht in previous year due to an increase in cost of sales of electricity and steam, resulting from power projects under GMP commencing commercial operations. Approximately 80.0% of the total cost of electricity and steam sales came from fuel cost, in which the SPP s average for the first three months in 2018 was baht per million BTU. Cost of management fee, which was the cost of management services for GJP, for the three months ended March 31, 2018 was 45.7 million baht, a decrease from 52.5 million baht in previous year. The decrease was caused by the Company s ability to allocate personnel of the management services for GJP more efficiently, resulting in a lower cost of management services for GJP. 5

7 Gross profit Gross profit for the three months ended March 31, 2018 was million baht, compared to a gross loss of 9.4 million baht in previous year. Administrative expenses Administrative expenses for the three months ended March 31, 2018 was million baht, an increase of 92.2 million baht or 66.8% due primarily to an increase in personnel expenses of the power projects under GMP, in the construction phase. Share of net profit from an associate and a joint venture Share of net profit from an associate and a joint venture, after adjustment of TFRIC 4, for the three months ended March 31, 2018 was 1,300.0 million baht, an increase of 65.8 million baht or 5.3% from 1,234.2 million baht in previous year. The increase was a result of an increase in the share of profit from GJP, caused by better performance of the SPPs under GJP. Compared to the same period in previous year, SPPs volume of electricity sold to EGAT and industrial users as well as volume of chilled water sold to industrial users increased, while their availability and heat rate efficiency also improved. The table compares GJP s volume of electricity, steam and chilled water sold by the IPPs and SPPs under the associate GJP for the three months ended March 31, 2018 and For the three months ended March 31 IPPs Volume of electricity sold (gigawatt-hour) GNS 1, ,552.5 GUT Total 1, ,492.0 SPPs Volume of electricity sold to EGAT (gigawatt-hour) 1, ,106.9 Volume of electricity sold to industrial users (gigawatt-hour) Volume of steam sold (ton) 66, ,013.0 Volume of chilled water (refrigeration ton) 7,462, ,243,

8 The table compares GJP s results of operations, before adjustment of TFRIC 4, for the three months ended March 31, 2018 and For the three months ended March 31 Change M. Baht M. Baht M. Baht % Total revenues 10, ,416.1 (556.4) (4.9) Total expenses (6,809.4) (7,504.8) (695.4) (9.3) Profit before effects on exchange rate 1, , Gains on exchange rate 1, , Profit for the year 3, , Profit attributable to owners of the parent 3, , Finance costs Finance costs for the three months ended March 31, 2018 was million baht, an increase of million baht or 66.5%. The increase of the Group s finance costs in the consolidated financial information, despite the significant drop of finance costs in the separate financial information, was primarily caused by the change of accounting record of interest paid for the six power projects under GMP, which commenced commercial operations, to be finance costs in the statements of comprehensive income, whereas in previous year, the Group recorded these expenses as cost of assets. Finance costs of these power projects increased million baht from 38.6 million baht in the first three months of 2017 to be million baht in the first three months of Profit before effects from exchange rate Profit before effects from exchange rate for the three months ended March 31, 2018 was 1,557.0 million baht, an increase of million baht or 85.1%, from million baht in previous year. Gains (losses) on exchange rate Gains on exchange rate for the three months ended March 31, 2018 was million baht, an increase of million baht due to the increase in U.S. dollar-denominated lendings for the power projects under GMP and also stronger appreciation of Thai Baht against U.S. dollar compared to previous year. Profit attributable to owners of the parent Profit attributable to owners of the parent for the three months ended March 31, 2018 was 1,707.7 million baht, an increase of million baht or 54.2% from 1,107.4 million baht in previous year. 7

9 3. Analysis of the Group s Financial Position as of March 31, 2018 The table compares the Group s financial position in accordance with the consolidated financial information as of March 31, 2018 and As of Mar 31, As of Dec 31, Change Cash and cash equivalents, and deposits at a financial institution used as collateral M. Baht M. Baht M. Baht % 19, ,399.1 (804.1) (3.9) Investments in an associate and a joint venture 21, , , Property, plant and equipment, net 55, , , Other assets 8, ,267.1 (383.5) (4.1) Total assets 105, , , Accounts payable for power plant construction 2, , Short-term interest-bearing debts 3, , Long-term interest-bearing debts 54, , Other liabilities 2, , Total liabilities 63, , , Issued and paid-up capital 10, , Share premium 20, , Unappropriated retained earnings (deficits) 3, , , Non-controlling interests 5, , , Other components of equity 1, , Total equity 42, , , Assets Total assets as of March 31, 2018 was 105,871.2 million baht, an increase of 5,219.3 million baht or 5.2%. The increase was attributable to the following factors: - An increase in property, plant and equipment, net of 5,002.0 million baht, due to an increase in value from the construction of GMP s power projects. - An increase in investments in an associate and a joint venture of 1, million baht, mainly from the record of share of profit from GJP, in which no dividend announced in this period. 8

10 Liabilities Total liabilities as of March 31, 2018 was 63, million baht, an increase of 2, million baht or 3.9%. The increase was primarily due to drawdown of long-term loans by the SPPs under GMP to finance construction costs and expenses of the power projects as well as an increase in accounts payable for power plant construction. Long-term loans from financial institutions to cover expenses of the power projects increased by 2,134.3 million baht, net and accounts payable for power plant construction increased by million baht. Due date The table shows the maturity profile of the Group s long-term borrowings as of March 31, Company IPD GMP THB (M. Baht) Long-term borrowings Gulf Solar GCG Total USD (M. Dollar) In 1 year - 2, , years 6, , , Over 5 years , , Total 6, , , , GMP Equity Total equity as of March 31, 2018 was 42,202.9 million baht, an increase of 2,854.7 million baht or 7.3%. The increase was primarily due to an increase in profit during the three months ended March 31, 2018, resulting in an increase in unappropriated retained earnings and an increase in non-controlling interests of Mitsui, caused by an increase in paid-up capital as well as an increase in profit of the power projects under GMP in proportion of the shareholding. The change in capital structure during the first three months of 2018 resulted in a slight decrease of debt to equity ratio from 1.56 times as of December 31, 2017 to 1.51 times as of March 31,

Gulf Energy Development Public Company Limited

Gulf Energy Development Public Company Limited Management Discussion and Analysis of the Company s Performance For the Year Ended December 31, 2017 The Management Discussion and Analysis of the Company s Performance (the MD&A ) is intended to present