Information Memorandum concerning Asset Acquisition Bangkok Aviation Fuel Service Public Company Limited

Transcription

1 -TRANSLATION- Enclosure 2 Information Memorandum concerning Asset Acquisition Bangkok Aviation Fuel Service Public Company Limited The Board of Directors Meeting No. 4/2015 of Bangkok Aviation Fuel Services Public Company Limited (the Company or BAFS ) held on November 5, 2015 passed the resolution to acknowledge the Department of Energy Business s letter No. Por Nor 0407/9766 dated October 13, 2015 stated that it has no objection to the investment in the Extension of Fuel Pipeline Transportation System to Northern Region Project (the Project or North Pipeline Project ) which will be extended from the existing fuel pipeline system of Fuel Pipeline Transportation Limited ( FPT ), whose 75% shares held by the Company. The investment will be divided into 2 phases; Phase 1: Bang Pa-In Kamphaeng Phet and Phase 2: Kamphaeng Phet Lampang with the fuel depots in Phichit and Lampang. Total investment cost is around Baht 7,759 million. Such project was initiated to enhance the liberal competition and in accordance with the resolutions of the National Energy Policy Committee ( NEPC ) No. 3/2015 on August 13, 2015 that allow the operators to develop the project with the support from the government agencies in letting lands at the appropriate rate and period. The acknowledgement by the Cabinet on the resolutions of NEPC was obtained on September 30, Such transaction is considered as an asset acquisition transaction of the listed company under the Capital Market Supervisory Board No. Tor Jor. 20/2551 regarding Rules for Entering into Substantial Transactions within the Definition of an Acquisition or Disposal of Assets dated August 31, 2008 and its amendments and the Notification of the Board of Governors of the Stock Exchange of Thailand regarding Disclosure and Compliance by Listed Companies relating to Acquisition or Disposal of Assets B.E dated October 29, 2004 ( Notification of Acquisition or Disposition ). The highest transaction size is 93.18% of total consolidated assets of the Company and its subsidiaries as of September 30, 2015 (the highest transaction size under the 3 rd calculation criteria which is total consideration value compares to total assets of the listed company). After combined such transaction with asset acquisition transactions occurred in the previous 6 months consisted of the Company s annual investment budget of 2016 which was approved by the Board of Director s meeting No. 4/2015 held on November 5, 2015 amounted to Baht million and the subsidiaries annual investment budget of 2016 which was approved by the Board of Directors meeting of each company totaling Baht million (consists of Fuel Pipeline Transportation Limited amounted to Baht million and Thai Aviation Refuelling Co., Ltd. amounted to Baht million). Total annual investment budget of 2016 is Baht million or equivalents to transaction size of 2.61% of total consolidated assets of the Company and its subsidiaries. Thus, the total transaction size is 95.79% of total assets of the Company and its subsidiaries as of September 30, The transaction is deemed as an acquisition of asset, type 1, pursuant to the Notification of Acquisition or Disposition which its size is higher than 50% but lower than 100%. Therefore, the Company appointed Capital Advantage Co., Ltd. as an independent financial advisor to provide the fairness opinion to the shareholders of the Company, disclose Information Memorandum to the Stock Exchange of Thailand ( SET ), and to obtain an approval from the shareholders meeting with a vote of not less than three-fourth of total voting right of shareholders who attend the meeting and are eligible to vote, excluding the votes of shareholders with the conflict of interest. The Board of Directors Meeting No. 5/2015 of the Company held on December 17, 2015 passed the resolution to approve the Company to enter into the transaction and arranged the Extraordinary General Meeting of Shareholders No. 1/2016 ( EGM 1/2016 ), which will be held on February 24, 2016 to approve such transaction. 1. Information Memorandum concerning Asset Acquisition, Schedule 1 1) Transaction date FPT will enter into the asset acquisition transaction after obtaining an approval from the EGM No. 1/2016, which will be held on February 24, ) The parties involved and the relationship with the Company 2.1) Long-term land leased agreement Lessee : Fuel Pipeline Transportation Limited ( FPT ) Lessors : Department of Highways and Department of Rural Roads that the fuel pipeline Relationship between Lessors and lessee passes through : No relationship with the Company 2.2) Construction and laying of fuel pipeline system

2 2.3) Employment of a consulting firm to undertake the project design and supervision Employer : Fuel Pipeline Transportation Limited ( FPT ) Contractor(s) : Under bidding preparation process Relationship between employers and : No relationship with the Company contractor(s) 2.4) Land acquisition to build Phichit Depot Buyer : Fuel Pipeline Transportation Limited ( FPT ) Sellers : Major Chan Yongpod Ms. Vanida Angkuldee Relationship between buyer and sellers Vachirachai Garden Home Ltd., Part. : No relationship with the Company 2.5) Land acquisition to build Lampang Depot Buyer : Fuel Pipeline Transportation Limited ( FPT ) Sellers : 35 individual persons* Relationship between buyer and sellers : No relationship with the Company Remark: * There were total 44 title deeds. Some sellers sold more than 1 title deed, and there were 2 co-owners in some title deeds (2 sellers/title deed) 2.6) Construction of Phichit Depot and Lampang Depot Employer : Fuel Pipeline Transportation Limited ( FPT ) Contractor(s) : Under bidding preparation process Relationship between employer and : No relationship with the Company contractor(s) 2.7) Land acquisition to build Booster Pump Stations in Singburi, Nakorn Sawan, Tak and Lampang 2.8) Land acquisition to build a Booster Pump Station and Offtake Station in Kamphaeng Phet 2.9) Land acquisition to build a Pipeline Connecting Station to fuel pipeline of Thai Petroleum Pipeline Co., Ltd. ( Thappline ) 2.10) Procurement of pipe, pump, valve and other related equipment Buyer : Fuel Pipeline Transportation Limited ( FPT ) Sellers : Under procurement process Relationship between buyer and : No relationship with the Company sellers 3) General characteristic of the transaction The Board of Director s meeting No. 5/2015 of the Company on December 17, 2015 passed the resolution to approve FPT, the Company s subsidiary, to enter into the investment in the Extension of Fuel Pipeline Transportation System to Northern Region Project. The Project is divided into 2 phases; Phase 1: Bang Pa-In Phichit with the distance of 365 kilometers and Phase 2: Kamphaeng Phet Lampang with the distance of 220 kilometers. FPT will enter into 30-year land lease agreement(s) with the Department of Highways and Department of Rural Roads to lay the fuel pipeline along the highway to facilitate the fuel transportation to provinces in the northern region. Total lease fee throughout the leased period is around Baht 259 million. FPT will acquire land to build 2 new fuel depots in Phichit and Lampang as per the following details; 13 land plots (later combined into four plots) in Phichit province with total area of rai (after title deed consolidation and cadastral survey, the land area becomes rai) at total value of Baht million (the ownership of land has been transferred to FPT since December 28, 2015) and 44 land plots in Lampang with total area of rai at total value of Baht million (the ownership of all land plots was transferred to FPT on December 1, 2015). Due to long distance of fuel transportation, the construction of 5 Booster Pump Stations in Singburi, Nakorn Sawan, Kamphaeng Phet, Tak and Lampang as well as the Pipeline Connecting Station to Thappline s fuel pipeline ( Thappline Pipeline Connecting Station ) is required to operate uninterrupted fuel transportation. Lands for 5 Booster Pump Stations and Thappline Pipeline Connecting Station will cost around Baht 11 million. The construction of fuel pipeline system, fuel depots, Booster Pump Stations, and Thappline Pipeline Connecting Station will commence when the Environmental Impact Assessment ( EIA ) report is proposed to and approved by the Office of Natural Resources and Environmental Policy and Planning ( ONEP ), Ministry of Natural Resources and Environmental. The procurement cost of pipe and other equipments, construction cost, and other related expenses is Baht 7,401 million (excluding land cost of Phichit Depot, Lampang Depot, Booster Pump Stations, and Thappline Pipeline Connecting Station). Page 2

3 Project development period (including construction) is approximately 30 months (Phase 1) and 36 months (Phase 2). The commercial operation date for Phase 1 and Phase 2 is expected to be in mid of 2018 and beginning of 2019, respectively. Development Plan of the North Pipeline Project June 2015 September 2016 : Application for tax promotion to the Board of Investment ( BOI ) June 2015 September 2016 : Prepare Environmental Impact Assessment (EIA) report March 2016 December 2016 : Procurement of fuel pipe and equipment (including production and transportation period) Quarter 1 2, 2016 : Apply for construction permit from the government agencies Quarter 1 2, 2016 : Procure contractor(s) to lay fuel pipeline and construction of fuel depot Phase 1 Quarter 2 3, 2016 : Procure contractor(s) to lay fuel pipeline and construction of fuel depot Phase 2 Quarter 3, 2016 Quarter 1, 2018 : Construction of fuel depot Phase 1 (No EIA is required) Quarter 3, 2016 Quarter 2, 2018 : Construction of fuel depot Phase 2 (No EIA is required) Quarter 3, 2017 Quarter 2, 2018 : Construction of fuel pipeline system Phase 1 Quarter 1, 2018 Quarter 4, 2018 : Construction of fuel pipeline system Phase 2 Quarter 1, 2018 : Application for fuel pipeline transportation system and fuel depot business permit Quarter 2, 2018 : Test run fuel pipeline transportation and fuel depot Phase 1 Mid of 2018 : Commercial operating fuel pipeline transportation system and fuel depot Phase 1 Quarter 4, 2018 : Test run of fuel pipeline transportation and fuel depot Phase 2 Beginning of 2019 : Commercial operation of fuel pipeline transportation system and fuel depot Phase 2 4) Details of the acquired assets FPT s investment in the North Pipeline Project is expected to start after an approval of EGM 1/2015 and FPT is able to meet all conditions precedent of the transaction. Presently, FPT provides the Multi-Products pipeline transportation service. It is able to transport aviation fuel (Jet A-1) and ground products via underground single pipeline from the receiving point at Bangchak and Chong Nonsi Depot to Don Muang Depot and Suvarnabhumi Airport Depot as well as ground products depot at Bang Pa-In, Phranakorn Sri Ayutthaya province. FPT s current fuel pipeline transportation system and the extension part to northern region Page 3

4 To invest in the North Pipeline Project, FPT has to request for co-operation from relevant government agencies including the Department of Highways and Department of Rural Roads to lease land to lay fuel pipeline along the highways with the total distance of 585 kilometers. This divided into 295 kilometers for Phase 1 from Bang Pa-In Depot to Kamphaeng Phet Offtake Station and 70 kilometers from Kamphaeng Phet Offtake Station to Phichit Depot. Total distance for Phase 1 is 365 kilometers. The distance for Phase 2 is 220 kilometers from Kamphaeng Phet Booster Pump and Offtake Station to Lampang Depot. The two new Depots in Phichit province and Lampang province will be built as shown in the following charts. The extension of fuel pipeline transportation system to northern region and pipeline routes on the highways 4.1) Details of land for Phichit Depot and Lampang Depot construction are as follows: a) 44 land plots with total area of rai at Tambol Mae Kua, Amphoe Sob Prab, Lampang Province Land details Area (rai) Obligation Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Title deed No None Total Page 4

5 b) 13 land plots with total area of rai at Tumbon Banna, Amphoe Vachira Baramee, Phichit Province Land details Area (rai) Obligation Title deed No None Remark: The seller consolidated 6 land plots on title deed No into 1 land plot which is title deed No before selling to FPT. After acquisition of 2 land plots on title deed No and 12672, FPT consolidated such land into 1 land plot which is title deed No After acquisition of 3 land plots on title deed No , FPT consolidated such land into 1 land plot which is title deed No After acquisition of 2 land plots on title deed No and 12677, FPT consolidated such land into 1 land plot which is title deed No In summary, after land consolidation, FPT held 4 land plots which are title deed No. 9087, 14611, and and cadastral survey caused the reduction in total land area to rai. 4.2) Land to construct Booster Pump Stations in Singburi, Nakorn Sawan, Tak, and Lampang, a Booster Pump and Offtake Station in Kamphaeng Phet, and the Thappline Pipeline Connecting Station. - Under procurement process- 5) Total value of consideration, basis of determining the value of consideration and terms of payment Total investment in the North Pipeline Project is Baht 7,759 million. The details of investment are as follows: 5.1) Land cost to construct Phichit Depot and Lampang Depot together with 5 Booster Pump Stations with approximately value of Baht 99 million Land at Lampang Depot: FPT acquired 44 land plots with total area of rai in Lampang value of Baht million including value of big trees on 6 land plots of Baht 0.33 million. Total land acquisition cost was Baht million. The payment for all lands has been made and the ownership has already been transferred to FPT on December 1, Additional land with the value of Baht 7 million is under procurement process. Land at Phichit Depot: 13 land plots (later the land was consolidated to 4 title deeds) with total area of rai (after land consolidation and cadastral survey, land area was reduced to rai). Total land value is Baht million. FPT has made payment for land and the ownership of land has already been transferred to FPT since December 28, The selling price is determined by the negotiation between FPT and the sellers and based on market price in the nearby area. Land to construct 5 Booster Pump Stations and Thappline Pipeline Connecting Station: total cost is approximately Baht 11 million. 5.2) Advisory fee is around Baht 466 million composed of advisory fee for Environmental Impact Assessment (EIA) Study, advisory fee for BOI application, advisory fee for Engineering Study, design and project management fee. Such fee is quoted by each advisor. The fee payment will be made in installment as specified in the agreement. 5.3) Procurement cost of pipe, pump, and valve is approximately Baht 2,329 million. Such cost was quoted by the sellers of pipe and equipment. FPT will import pipe and related equipment from abroad. The payment will be made when the pipe and equipment are delivered. 5.4) The turn-key construction cost of pipeline system and fuel depot is about Baht 4,159 million. The construction cost is estimated by an engineering study advisor who had an experience to design and construct High Speed Diesel (HSD) storage and water tank for fire extinguisher and related system to FPT at Don Muang Depot. The payment condition for construction cost in general will be made in installment against work progress of the project. However, at present the contractor for this project has not been chosen yet. 5.5) Miscellaneous expenses are about Baht 447 million including right of way clearing and access road expenses around Baht 50 million, transportation expenses of Baht 68 million, pipeline test with Intelligent PIG of Baht 50 million, insurance expenses of Baht 30 million, and contingency expenses of Baht 249 million. Such expenses are estimated by FPT. 5.6) 30-year land lease payment to the Department of Highways to lay the fuel pipeline is around Baht 259 million. The lease fee is based on the rate as set in the Ministerial Regulation Section 42, Paragraph 2, of the Highway Act B.E (1992) which was amended by the Highway Act (Issue 2) B.E Based on Section 56, Paragraph 3, of the Highway Act B.E which was amended by the Highway Act (Issue 2) B.E (2006), the lessee has to make lease payment within 30 days from the day that receive the notification letter. The leased payment is made on yearly basis. The lease fee will increase by 15% every 5 years. Page 5

6 6) Transaction size FPT s investment in the North Pipeline Project of around Baht 7,759 million is an asset acquisition transaction. The highest transaction size equals to 93.18% of total consolidated assets of the Company and its subsidiaries as of September 30, 2015 (the highest transaction size is the 3 rd calculation criteria which is total value of consideration to total assets of listed company). Calculation of transaction size Calculation Criteria Calculation (Baht in Million) Transaction Size 1. Net Tangible Assets (NTA) Unable to calculate due to it is not acquisition of N/A securities. 2. Net Operational Profit Unable to calculate due to assets have no profit N/A 3. Total Value of Consideration Method 7,759 1/ / 8, / 93.18% 4. Value of issued securities of the listed company Unable to calculate due to no securities issuance N/A in consideration of the acquisition of assets for assets acquisition Highest Transaction Size 93.18% Remark: 1/ Details of investment are as follows: Land cost to construct depots and Booster Pump Stations 99 Baht million Advisory fee 466 Baht million Procurement cost of pipe, pump, and valve 2,329 Baht million Construction cost 4,159 Baht million Miscellaneous expenses 447 Baht million Total 7,500 Baht million Land leased to lay fuel pipeline throughout 30-year period 259 Baht million Grand Total 7,759 Baht million 2/ Total assets of the Company based on the reviewed consolidated financial statement as of September 30, After combined such transaction with asset acquisition transactions occurred in the previous 6 months consisted of the Company s annual investment budget of 2016 which was approved by the Board of Director s meeting No. 4/2015 held on November 5, 2015 amounted to Baht million and the subsidiaries annual investment budget of 2016 which was approved by the Board of Directors meeting of each company totaling Baht million (consists of Fuel Pipeline Transportation Limited amounted to Baht million and Thai Aviation Refuelling Co., Ltd. amounted to Baht million). Total annual investment budget of 2016 is Baht million or equivalents to transaction size of 2.61% of total consolidated assets of the Company and its subsidiaries. Thus, the total transaction size is 95.79% of total assets of the Company and its subsidiaries as of September 30, ) Benefits of the transaction The North Pipeline Project will increase revenues and profit to FPT and the Company, as a major shareholder of FPT, and provides returns to the Company in the long run. The development of this project will be beneficial to FPT and the Company from the recognition of reasonable operating performance of this project in the future. The Board of Directors meeting No. 5/2015 which held on December 17, 2015 considered the return on investment of the North Pipeline Project as follows: Net Present Value or NPV Baht 1,296 million Internal Rate of Return or IRR 9.53% p.a. Payback Period 15 years Source: Genetic Wealth Co., Ltd. as a financial advisor of FPT and reviewed by Bangkok Bank PCL as a Company s advisor. In addition to the benefits to FPT and the Company, it also provides benefits to the public sector and the country. It will enhance energy stability for the country and also increase fuel transportation efficiency by developing basic infrastructure to transport fuel to the provincial area. The country has more fuel reserve system. It can be connected to the fuel depot which is the strategic military point. It enhances liberal trade by allowing every fuel traders to access the service equally. It also helps preserve environment and natural resources of the country. For the private sector, this project ensures the sufficiency of fuel because the pipeline system is safe and stable. Those who live in the northern region are able to use the fuel at the lower cost than current cost and at nearly at the comparable rate of Bangkok. It also reduces the road accident from large fuel transportation truck and also reduces pollution from road and track fuel transportation systems which help improved the environment. For business sector, this project enables to every pipeline users to access the service equally and is competitive with the road and track fuel transportation systems. Page 6

7 8) Sources of funds Total initial investment of the North Pipeline Project is approximately 7,500 million (excluding 30-year land leased cost to be gradually paid on yearly basis) consists of land cost to build depots and Booster Pump Stations, advisory fee, pipe, pump, valve costs, and construction cost of fuel pipeline system, depots and Booster Pump Stations, and other related expenses. Source of fund will come from Rights Offering of FPT amounting to approximately Baht 3,400 million 1, and the remaining will come from loan from the financial institutions. However, FPT plans to procure loan from bank amounted to Baht 4,600 million divided into Baht 4,100 million to finance construction of the project and Baht 500 million for interest expenses during construction. Currently, FPT is in the negotiating process with the financial institutions. Source of fund for yearly land leased cost to be paid to the Department of Highways and Department of Rural Roads throughout 30-year contract period of approximately Baht 259 million will come from cash flow from operation and working capital of FPT. Source of fund for FPT s Rights Offering in proportion to the Company s shareholding in FPT 2 of approximately Baht 2,550 million will come from a part of sale proceeds of FPT s existing shares of approximately Baht 300 million, and the remaining will come from loan from financial institution. Currently, the Indicative Term Sheet has been obtained, and it is under negotiation process with the financial institutions. 9) Conditions precedent of entering the transaction Before entering into the land lease agreement, implementing the North Pipeline Project, and building fuel depots in Phichit and Lampang, approvals from the Company s and FPT s shareholders meetings are required. Moreover, FPT has to comply with the related laws. The Department of Energy Business will take part to consider the details of the Project. FPT has to implement the operating plan as follows: a) Prepare the Environmental Impact Assessment (EIA) report for an approval of the Office of Natural Resources and Environmental Policy and Planning (ONEP), Ministry of Natural Resources and Environment. b) Design the pipeline routes and design fuel pipeline transportation system and fuel depots. c) Apply for fuel pipeline transportation and fuel depot license with the Department of Energy Business, Ministry of Energy, pursuant to regulation of control business type 3 in accordance with Fuel Control Act B.E (1999). d) Build fuel pipeline transportation system and the fuel depots. e) Test run and commercially operate fuel pipeline transportation system and fuel depots. 10) Summary of agreements related to asset acquisition transaction 10.1) Engineering Study Agreement Counter parties Employer : Fuel Pipeline Transportation Ltd. Contractor : Index International Group Co., Ltd. Date of agreement October 15, 2015 Scope of agreement 1. Study the area to build the fuel depot to store the fuel which is transported via pipeline system from Phitsanulok to Kamphaeng Phet and Phase 2 from Lamphun to Lampang. 2. Undertake engineering study and estimate preliminary cost of fuel pipeline system in each part (Part 1 to Kamphaeng Phet Depot and Part 2 to Lampang Depot) 3. Undertake engineering study and estimate construction cost of fuel pipeline system (fuel depots in Kamphaeng Phet and Lampang) 4. Prepare the recommendation for Kamphaeng Phet and Lampang Depot s location. 5. Review the budget of this new project to obtain the most likely budget. Contract period October 15, 2015 November 14, 2015 Fee and payment condition The employer will make fee payment as specified in the contract when the work is 100% completed and sign-off by employer s representative and deliver the required document as specified in the agreement. 1 According to Clause 6 regarding future capital increase of FPT in the Memorandum of Agreement to purchase FPT s shares between the Company and Bangkok Airways PCL. and PTG Energy PCL., Bangkok Airways PCL. and PTG Energy PCL. agree to subscribe Baht 3,400 million Rights Offering of FPT in proportion to their shareholding. In addition, other major FPT s shareholders also replied questionnaires on the preliminary interest to support FPT s capital increase plan. For example; Bangkok Insurance PCL. intends to subscribe the Rights Offering of FPT in proportion to its shareholding, and Bangchak Petroleum PCL. is also interested in the North Pipeline Project and it is now under studying process of FPT s capital increase. 2 As of January 19, 2015 FPT s shares held by the Company is 39,100,184 shares or 75% of FPT s paid up capital. If the EGM No. 1/2016 on February 24, 2016 approves this asset acquisition transaction and the shareholders meeting of FPT approves the increase in registered capital, FPT will increase its capital by way of Rights Offering amounted to approximately Baht 3,400 million. Page 7

8 Suspension and Termination of the contract Penalty fee The employer has right to terminate the contract if the employer views that the contractor does not work with professional standard or does not comply with the conditions specified in the contract. The contractor has the right to terminate the contract if the employer does not perform its role and responsibilities as specified in the contract. If the contractor is unable to complete the task within the contract period, the contractor agrees to pay penalty fee of Baht 2,000 per day until the completion date. 10.2) Basic Design and Application for Construction Permit of Fuel Depot Phase 1 Agreement (Phichit) Counter parties Employer : Fuel Pipeline Transportation Ltd. Contractor : Index International Group Co., Ltd. Date of agreement November 30, 2015 Scope of agreement The contractor undertakes the basic design and applies for construction permit of fuel depot in Phase 1 (Phichit). The contractor has to work based on architectural and engineering principle and related law in accordance with the details in the agreement. Contract period November 30, 2015 February 28, 2016 Fee and payment condition The payment of fee as specified in the contract will be made when the work is 100% completed. 10.3) Advisory Agreement for BOI Application of the Extension of Fuel Pipeline System and Fuel Depot to Northern Region (Ayutthaya Lamphun) Project Counter parties Employer : Fuel Pipeline Transportation Ltd. Advisor : Prosumer Power Network Ltd., Part. Date of agreement September 1, 2015 Scope of agreement To advise for BOI application of the Extension of Fuel Pipeline System and Fuel Depot to Northern Region (Ayutthaya Lamphun) Project in accordance with the details specified in the attachment of the contract. Contract period September 1, 2015 April 30, 2019 Advisory fee and payment condition The payment of fee as specified in the agreement for BOI application of the Extension of Fuel Pipeline System and Fuel Depot to Northern Region (Ayutthaya Lamphun) Project will be made in 5 installments based on the work progress. Termination of the project If the advisor is unable to complete the task within the contract period, the employer has right to terminate the contract immediately. If the employer terminates the contract without the advisor s fault, the employer has to notify the advisor in written for 30 days in advance Advisory Agreement for preparing Environmental Impact Assessment (EIA) report of the Extension of Fuel Pipeline System and Fuel Depot to Northern Region (Bang Pa-In Lamphun) Project Counter parties Employer : Fuel Pipeline Transportation Ltd. Advisor : Consultant of Technology Co., Ltd. Date of agreement September 1, 2015 Scope of agreement To advise for preparing EIA report of the Extension of Fuel Pipeline System and Fuel Depot to Northern Region (Ayutthaya Lamphun) Project in accordance with the details specified in the agreement Contract period September 1, 2015 July 31, 2016 Advisory fee and payment condition The advisory fee payment at the amount specified in the agreement for EIA study and EIA report of the Extension of Fuel Pipeline System and Fuel Depot to Northern Region (Ayutthaya Lamphun) Project will be made in 5 installments based on the work progress with the delivery of the required document as specified in the agreement. If the employer choose the alternative (Bang Pa-In Lampang) within November 2015, the advisor agrees to adjust amount of advisory fee for EIA report to the amount as specified in the agreement without change in payment condition. Termination of the project 1. If the advisor does not comply with the professional standard practice and intentionally causes the damage to the employer, the employer has right to terminate the contract immediately and able to claim indemnity from the advisor at the amount not exceed the advisory fee as specified in the agreement. 2. If the advisor is unable to complete the task within the contract period and has been warned or does not comply to any clause in the agreement, the employer has right to hire a new advisor to resume the work until the work is completed and the advisor agrees to pay for the expense incurred during the period beyond contract period. Penalty fee If the work is delayed from the timeframe specified in the agreement, the advisor agrees to pay penalty fee on daily basis at 0.05% of total value of work per day but not exceed 10% of total value of work. Page 8

9 11) Opinion of the Company s board of directors concerning the transaction The Board of Director of the Company is of the opinion that entering into the transaction is reasonable and will be beneficial to the business sector, private sector, and the country as a whole. In addition, it will increase revenues and profit to FPT and the Company, as FPT s major shareholder, in the long run. Therefore, the Board of Directors meeting unanimously approved to enter into this transaction. 12) Opinion of the Audit Committee and/or a director who has a different opinion from the opinion of the Company s board of directors concerning the transaction The Audit Committee members and the Company s directors did not have any different opinions from those of the Board of Directors as mentioned above. 2. Liability of the Board of Directors of the Company to the Information Memorandum The Company s Board of Directors are responsible for the information contained in this Information Memorandum and would like to certify that such information is accurate, true, and complete and will not cause any misunderstanding or material non-disclosure on the information 3. The qualifications of the Independent Financial Advisor to express the opinion of the transaction a. Shareholding and relationship of Financial Advisor and the Company -Noneb. Consent from Financial Advisor to disclose the information Capital Advantage Co., Ltd., Independent Financial Advisor, provided a consent to disclose the information. c. Date of opinion January 27, Liabilities (1) Total amount of debt instrument -None- (2) Total debt with specified repayment period including liabilities having assets pledge/mortgage as collateral (2.1) Long-term loan (Unit: Baht Thousand) No. Loan amount Consolidated Financial Statement Seperate Financial Statement Company 1 Baht 800 million 222, , , ,778 2 Part 1: Baht 1,700 million 711, , , ,400 Part 2: Baht 300 million 125, , , ,200 3 Baht 220 million 145, , , ,000 4 Baht 700 million 525, , , ,000 Subsidiaries 5 Baht 550 million - 144, Baht 700 million 77, Baht 170 million 29, Baht 230 million - 125, Bath 90 million 60,000 46, Total 1,896,442 1,708,358 1,729,422 1,392,378 Deduct: Current portion of long-term loan (458,064) (357,644) (337,045) (337,045) Long-term loan net 1,438,378 1,350,714 1,392,377 1,055,333 Movements in the long-term loans account during the nine-month period ended September 30, 2015 are summarized below. (Unit: Baht Thousand) Separate financial statements Consolidated financial statements Balance as of January 1, ,708,358 1,392,378 Add: Additional loan during a period 114,611 - Less: Repayment of loans during the period (274,395) (263,894) Balance as of September 30, ,548,574 1,128,484 Less: Current portion (377,444) (337,045) Long-term loans - net of current portion 1,171, ,439 Page 9

10 Loan of the Company Loan No. 1: The principal will be paid in 16 semi-annual installments of Baht million each, within August 31, Interest is payable semi-annually at 6-Month THBFIX plus a fixed percentage per annum. The Company has entered into an agreement with a bank to hedge the interest rate risk on the full amount of the loan, whereby the Company will pay interest at a fixed rate per annum to the bank and the bank will pay interest to the Company at the 6-Month THBFIX plus a fixed percentage per annum. As at December 31, 2014, the fair value of these interest rate swap contracts is approximately negative Baht 10 million. Loan No. 2: Credit facilities of Baht 1,700 million and Baht 300 million, for which principal is to be paid in 32 quarterly installments, of Baht million and Baht 6.30 million each respectively, within December 31, Interest is payable monthly at the 3-month fixed deposit rate plus a fixed percentage per annum. Loan No.3: Principal is to be paid in 32 quarterly installments of Baht 6.25 million each, within November 28, Interest is payable monthly at MLR minus a fixed percentage per annum. Loan No. 4: Principal is to be paid in 28 quarterly installments of Baht 25 million each, within 30 September 30, Interest is payable monthly at MLR minus a fixed percentage per annum. Loan No. 5: Principal is to be paid in quarterly installments of Baht million each, beginning in March 2017, and the loan matures in December Interest is payable monthly at 3-month BIBOR plus a fixed percentage per annum. Loan No. 6: Principal is to be paid in 18 quarterly installments of Baht million each, within December 31, Interest is payable monthly at the higher of the 3-month fixed deposit rate for individuals or corporations, plus a fixed percentage per annum. Loan No. 7: Principal is to be paid in 18 quarterly installments of Baht 7.37 million each, within December 31, Interest is payable monthly at MLR minus a fixed percentage per annum. Loan No. 8: Principal is to be paid in 105 monthly installments of Baht 2.20 million each, beginning in October 2015, and the loan matures in June Interest is payable monthly at MLR minus a fixed percentage per annum. Loan No. 9: Principal is to be paid in 26 quarterly installments of Baht 3.50 million each, with first installment in March 2014, and the loan matures in May Interest is payable monthly at MLR minus a fixed percentage per annum. As of September 30, 2015, the long-term credit facilities of subsidiaries which have not yet been drawn down amounted to Baht 426 million (December 31, 2014: Baht 540 million). (2.2) Long-term liabilities under rehabilitation plan Movements in the long-term liabilities under rehabilitation plan account of Fuel Pipeline Transportation Limited (the subsidiary) during the year ended December 31, 2014 and for 9-month ended September 30, 2015 are summarized below. (Unit: Baht Thousand) Consolidated Financial Statement Dec. 31, 2013 Dec. 31, 2014 Sep. 30, 2015 Balance at beginning of year - 37,243 32,331 Add: Acquisition through business combination 39, Less: Repayment of long-term liabilities during the year (2,526) (4,912) (5,943) Balance at end of year 37,243 32,331 26,388 Less: Current portion (4,987) (4,849) (4,861) Long-term liabilities under rehabilitation plan - net of current portion 32,256 27,482 21,527 FPT has to repay long-term liabilities under the rehabilitation plan in monthly installments within 10 years period from the court approval date of the rehabilitation plan, with the first installment on October 31, However, if FPT has excess cash, it has to use such excess cash to prepay its outstanding debt. The interest payment for long-term liabilities under the rehabilitation plan is made on monthly basis with the first payment due in the following month that the Central Bankruptcy Court approved the plan. The interest rates charged on long-term liabilities under the rehabilitation plan are as summarized below. Period Annual interest rate The date after the court approved the plan until October 31, 2013 MLR % November 1, 2013 to October 31, 2016 MLR % November 1, 2016 onwards MLR % Page 10

11 Long-term liabilities under the rehabilitation plan are secured by the mortgage of the FPT s multi-product pipeline system and main depot facilities. Moreover, FPT has to comply with certain conditions as stipulated in the rehabilitation plan. (3) Total other liabilities -None- (4) Contingent liabilities (4.1) Capital commitments As of September 30, 2015 the Company and its subsidiaries had capital commitments of approximately Baht 607 million (December 31, 2014: Baht 783 million), relating to the construction of assets and acquisition of equipment (December 31, 2014: Baht 236 million). (4.2) Commitments under various agreements a) The Company and its subsidiaries have entered into several lease agreements in respect of the lease of hydrant equipment, land, airport space and building and motor vehicle. The terms of the agreements are generally between 1 to 30 years. These operating lease agreements are noncancellable agreements, under which the Company and its subsidiaries are required to comply with the certain conditions, including obligations to transfer the ownership of constructed assets to the lessors under some land lease agreements. Future minimum lease payments under these non-cancellable operating leases contracts as of September 30, 2015 were as follows: (Unit: Baht million) Over 5 years Total Not over 1 year Over 1 year but less than 5 years Bangkok Aviation Fuel Services Public Co., Ltd Thai Aviation Refuelling Co., Ltd Fuel Pipeline Transportation Ltd Total b) The Company has entered into an agreement with Airports of Thailand PCL. (AOT) whereby it was granted permission to provide into-plane services at Suvarnabhumi Airport for 20 years period from the official opening date of the airport (September 28, 2006). The Company has to compensate AOT at the rate as stipulated in the agreement and has to comply with certain obligations. These obligations include entering into land lease agreement, buildings and certain structures on the land and transfer ownership of such construction to the Ministry of Finance immediately upon completion, without any charge. They also include the installation of equipment and systems to be used in implementing the project and, at its own expense, maintaining such equipment and systems in good and workable condition throughout the term of the agreement. c) A subsidiary, Thai Aviation Refuelling Co., Ltd. has been granted approval by AOT to operate aviation fuel hydrant network services at Suvarnabhumi Airport, for a period of 30 years from the first operation date of that company at the airport (September 28, 2006). The subsidiary is obliged to comply with certain conditions, including an obligation to transfer the ownership of the hydrant refuelling. network including related supplies and spare parts, free of charge to AOT, and to pay a concession fee at a percentage of the subsidiary s income before deducting expenses, as stipulated in the agreement, as from the year of first operation. (4.3) Guarantees The Company and its subsidiaries have outstanding bank guarantees in the consolidated financial statement as follows: (Unit: Baht million) Objectives Dec. 31, 2013 Dec. 31, 2014 Sep. 30, 2015 Guarantee electricity utilization Guarantees for agreements (4.4) Long-term employee benefits Movement of long-term employee benefits for 9-month period ended September 30, 2015 was as follows: (Unit: Baht Thousand) Consolidated Financial Statement Balance as of January 1, ,740 Increase during the period 49,966 Benefits paid during the period (29,501) Balance as of September 30, ,205 Page 11

12 5. General information of Bangkok Aviation Fuel Services Public Company Limited 5.1 General information Company Name : Bangkok Aviation Fuel Services Public Company Limited Main Business : Provider of aviation fuel services including aviation depot and aircraft refuelling services Head Office : 171/2 Kamphaeng Phet 6 Rd., Don Muang, Don Muang, Bangkok Telephone : Fax : Website : Registered Capital : Baht 637,496, Divided into 637,496,657 ordinary shares at par value of Baht 1.00 per share Paid-up Capital : Baht 637,496, Divided into 637,496,153 ordinary shares at par value of Baht 1.00 per share 5.2 Business Outlines Background Bangkok Aviation Fuel Services Public Company Limited (the Company or BAFS ), was incorporated on December 30, 1983 with the initial registered capital of Baht 80 million. It was inaugurated in line with the resolution of the Cabinet and the resolution of the Office of the National Economics and Social Development Board to offer aircraft refuelling services. Currently, the Company operates the aviation depot and aircraft refuelling services of all types and all flights at Don Muang International Airport. The Company offers a full range of 3 systems; an aviation fuel depot system, an underground Hydrant Pipeline System, and an aviation refuelling system (Into-Plane). The Company s customers are aviation fuel traders that sell fuel to the airlines. There are 2 types of aircraft refuelling services the Company offers, the jet fuel (Jet A-1) and aviation fuel for piston aircraft (AVGAS). On September 28, 2006, Thailand International Airport has been moved from Don Muang Airport to Suvarnabhumi Airport. The Company and its subsidiaries have provided the completed same set of services as those at Don Muang Airport. Later on March 25, 2007 the Cabinet has approved the resuming of Don Muang Airport, used in parallel with Suvarnabhumi Airport due to the crack of the airport runways and taxiways, as well as the congestion of aircraft using only one airport. Those flights moved back to Don Muang Airport are mainly domestic flights, with no connected route and low cost services. On March 29, 2009, Thai Airways International Public Company Limited has transferred its domestic flights from Don Muang Airport to Suvarnabhumi Airport, according to the city s only airport policy of the Government. On October 25, 2011, Airports of Thailand Public Company Limited ( AOT ) has announced the close of Don Muang Airport and moved all the flights to Suvarnabhumi Airport. However, due to the increasing number of passengers, to help ease the traffic at Suvarnabhumi Airport, AOT then supports low cost carriers and other domestic and international flights with point to point routes to move the services back to Don Muang Airport since October 1, In addition to the services at Don Muang International Airport, and Suvarnabhumi Airport, the Company is providing fuel for jet aircraft to Bangkok Airways at three regional airports, Samui Airport in Suratthani Province, Sukhothai Airport in Sukhothai Province, and Trad Airport in Trad Province. The Company obtained a license from Bangkok Airways Public Company Limited to operate the aircraft refuelling service in an extension period for 25 years starting from 2000 to Once the contract expired, the contract period may be extended for another 5 years. In 2014 Thai Aviation Refuelling Co., Ltd. ( TARCO ), the Company s subsidiary obtained the right to expand its investment in the project to provide aviation fuel through the underground hydrant pipeline system (the Hydrant System ) Phase 2 at Suvarnabhumi Airport from AOT from the existing period of around 22 years until September 27, 2036 in line with the capability enhancement to support the growth in number of passenger at Suvarnabhumi Airport. To increase the management efficiency to support business expansion in fuel pipeline system of the Group in the future which would enhance the financial status and add value to the business, the Board of Directors passed the resolution to approve the merger JP-One into FPT. JP-One has transferred its entire business to FPT and register to dissolve business with the Department of Business Development, Ministry of Commerce on February 3, 2014 and business liquidation registration is completed on November 27, Page 12

13 5.2.2 Group structure Company % shareholding Relationship Nature of business by the Company 1. Thai Aviation Refuelling Company Limited or TARCO Subsidiary Aviation fuel service 2. Fuel Pipeline Transportation Limited or FPT 1/ Subsidiary Pipeline transportation 3. Into-plane Service Company Limited or IPS Subsidiary Into-plan fuelling service Remark: 1/ To enhance potential for business expansion of pipeline transportation service, JP-One merged with FPT by mean of the entire business transfer and FPT will exist after merging. On February 3, 2014 FPT registered to increase its registered capital from Baht million to Baht million by issuing 24,278,941 ordinary shares to the Company and other JP-One s shareholders in exchange with the entire business transfer to FPT Nature of business The Company provides aviation fuel services including aviation fuel depot and aircraft refuelling service at Suvarnabhumi Airport and Don Muang Airport. Besides the service at Suvarnabhumi Airport and Don Muang Airport, the Company also provides services at three regional airports; Samui Airport in Suratthani Province, Sukhothai Airport in Sukhothai Province, and Trad Airport in Trad Province. Furthermore, the Company conducts its business through subsidiaries i.e. Thai Aviation Refuelling Company Limited ( TARCO ), JP-One Asset Co., Ltd. ( JP-One ), Into-plane Services Company Limited ( IPS ), and Fuel Pipeline Transportation Limited ( FPT ). The Company has a policy to classify the operation within the Group as follows. (1) Aviation fuel service business The Company is a sole operator at Don Muang Airport and regional airports, providing a comprehensive aviation fuel service including hydrant pipeline system, depot, and into-plane services. The Company provides aviation depot and into-plane service, while TARCO provides only hydrant pipeline system at Suvarnabhumi Airport. (2) Pipeline transportation business Fuel Pipeline Transportation Limited ( FPT ) provides fuel depot service and fuel pipeline transportation of Multi-Product via the underground pipeline from Bangchak Refinery to aviation fuel depot at Suvarnabhumi Airport, aviation depot at Don Muang Airport and the pipeline ends at ground product depot at Bang Pa-In. (3) Into-plane service Into-plane Services Company Limited ( IPS ) conducts into-plane fuelling service, by being engaged from the Company. Currently, it provides service at Samui Airport, Sukhothai Airport, and Trad Airport. According to its current policy, IPS s services cover only regional airports Revenue structure Revenue of the Company consists of (1) Services income from providing aviation fuel services, fuel depot, aviation refuelling services and transportation aviation fuel through the hydrant pipeline system and transportation fuel through the pipeline (2) Rental income (3) Other income Revenue structure of the Company and its subsidiaries by category of business in the consolidated financial statement is as follows: (Unit: Baht million) Revenue Operate by month 2015 Amount % Amount % Amount % 1. Service income BAFS 1, , , TARCO JP-One 1/ FPT 1/ Rental income BAFS TARCO JP-One 1/ FPT 1/ Revenue from flood compensation BAFS Gain from business consolidation Income from reversing allowance for doubtful debts 6. Other income 2/ Total 3, , , Page 13