(Translation) - Information Memorandum - Prima Marine Public Company Limited (PRM)

Transcription

1 Information Memorandum Prima Marine Public Company Limited (PRM) Head Office 80 Soi BangnaTrad 30 BangnaTrad Road Bangna Bangkok, Tel Fax Website Listing Date As at 14 September 2017 (Trading commencement on 14 September 2017) Listing Securities No. of common shares of 2,500,000,000 shares, par value per share of Baht 1.00, and total value of 2,500 million Baht Capital Secondary Market Offering Price As of 14 September 2017 (Trading commencement) Registered capital Common Shares Paidup capital Common Shares Stock Exchange of Thailand (SET) 8.00 Baht 2,500 million Baht 2,500 million Baht Offering Date 6 to 8 September 2017 for the customers of the underwriters, the patronage of the Company, and domestic institutional investors New ordinary shares for Initial Public Offering (IPO) of 500,000,000 shares Existing ordinary shares for IPO of 150,000,000 shares Austin Asset Limited (99.99% held by Nathalin Company Limited) offers the sales of existing ordinary shares for IPO with the amount of 105,000,000 shares Nathalin Company Limited ( NAT or Nathalin ) also offers the sale of existing ordinary shares for IPO with the amount of 45,000,000 shares Objectives and plans for utilizing the capital increase Fund Raising Objectives Approximate Amount (Baht million) Approximate Time of Use 1. For investment in new vessels and vessel expansion of oil and petrochemical tanker business, FSU business, and Offshore 2,826 business 2. For working capital of the Company to to For repayment of loans from financial institutions Total 3,906 Green Shoe Option None 1

2 Type of Business and Nature of Operation At present, Prima Marine Public Company Limited (the Company or PRM ), its subsidiaries, associates, and joint ventures (collectively referred to as the Group ) provide integrated marine logistics, offshore services, and ship management services to the customers. The services provided by the Group are crucial part of supply chain of oil and petrochemical industry. With due care in quality and standard of the services provided, the Group has been continuously recognized by its domestic and international customers. The Group s core businesses are consisted of 4 businesses as followings 1) Oil and petrochemical tanker business ( Oil and Petrochemical Tanker Business ), which is operated by oil and petrochemical tankers 2) Floating storage unit (FSU) business ( FSU Business ), which is operated by vessels with large storage unit ( FSU ) 3) Offshore support vessel business ( Offshore Business ), which consists of floating storage and offloading unit ( FSO) business ( FSO Business ) and accommodation work barge (AWB) business ( AWB Business ), and anchor handling tugs (AHTs) business 4) Ship management business 1. Revenue Structure The Group s service revenue from 2014 to 2016 and for the period of six months ended June 30, 2017 can be classified in accordance with its 4 core businesses as follows. Revenue from Services by Core Businesses For the Year Ended For the Period of Six months Ended 31 December December December June June 2017 (Baht (Baht (Baht (Baht (Baht (%) (%) (%) (%) (%) Million) Million) Million) Million) Million) Oil and Petrochemical , , Tanker Business FSU Business 1, , , , Offshore Business Ship Management Business Total Service Revenue 3, , , , , As of June 30, 2017, the Group have vessels for operating businesses classified by type of vessels as follows. Type of Vessels No. of Vessels Owned by the Company and its Subsidiaries DWT Utilization Rate 1 Owned by Joint Venture Companies No. of Vessels DWT Utilization Rate 1 No. of Vessels 1.1 Oil and Petrochemical Tankers 2 Small (0 10,000 DWT) 12 44, % 12 44,651 Aframax , % 1 105, % 2 211,531 Total DWT 2

3 Total Oil and Petrochemical Tankers , % 1 105, % , FSU 2 VLCC 4 5 1,495, % 2 580, % 7 2,075,995 Total FSU 5 1,495, % 2 580, % 7 2,075, FSO 2 Aframax , % 1 96, % 2 191,754 Total FSO 1 94, % 1 96, % 2 191,754 Total Oil and Petrochemical Tankers, FSU, and FSO 19 1,740, , ,523, Other Vessels AWB Pax. 74.7% Pax. Remark : 1 Utilization Rate of Oil and petrochemical Tankers are calculated by total hours of operation for the period of six months ended June 30, 2017, excluding times spent for anchoring, bunker filling, vessel inspection, preventive maintenance, and dry dock. Utilization Rate of FSU, FSO and AWB are calculated by total days of operation, excluding Dry dock period 2 As of June 30, 2017, oil and petrochemical tankers, FSU, and FSO have an average vessel age of 18.4 years, 17.4 years, and 22.0 years, respectively 3 Aframax vessels have maximum capacity in a range of 80, ,000 DWT 4 Very Large Crude Carrier (VLCC) have maximum capacity in a range of 160, ,000 DWT 2. Product Characteristics (1) Oil and Petrochemical Tanker Business The Group provides marine logistics to customers in oil refinery business and major oil trading companies to transport products by vessels from various origins to specified destinations, where the Group is required to provided services with qualified oil and petrochemical tankers that meet the customers requirement with experienced personnel and crews and transportation safety and to comply with the agreements between the Group and the customers. From 2014 to 2016 and the period of six months ended 30 June 2017, the Group s proportion of transportation by destination ports is as follows. Destination Port (%) 2015 (%) (%) 30 June 2017 (%) Upper Gulf of Thailand Southern Region of Thailand International Total Remark : 1 Destination ports located in the Upper Gulf of Thailand include Bangkok, Rayong, Sattahip, Si Racha, Samut Sakhon, and Phetchaburi Destination ports located in Southern region of Thailand include Surat Thani, Songkhla, Nakhon Si Thammarat, area around oil rigs in the Gulf of Thailand, Phuket, and Krabi 3

4 International destination ports include Cambodia, Singapore, Malaysia, Vietnam, Indonesia, South Korea, China, and Australia 2 In 2016, the Group s proportion of transportation to international destination ports significantly increased due to the of operation commencement of the Group s Aframax vessel with capacity of 105,996 DWT, providing transporting services to international destination ports The products that the Company provides marine logistics service are of liquid in nature, and the Company has expertise in providing transportation service of such oil and petrochemical products as Benzene, Diesel, Jet A1, Naphtha, Cyclohexane, Ethanol, paraxylene, Mixed Xylene, and Toluene. Target Customers and Distribution Channel Target Customers The Company s target customers are major oil companies, oil refinery companies, and domestic and international major oil trading companies, which require due care in quality, safety, environmentalfriendly, and high standard of marine logistics services to preserve the quality of the products under transportation. For this reason, customers require marine logistics service providers, which have expertise and experience in providing marine transportation and comply with relevant rules and regulation, including regulations concerning environmental pollution. Examples of the Company s group of customers are PTT Public Company Limited, the Shell Company of Thailand Limited, Chevron Thailand Exploration and Production Company Limited, Esso ( Thailand) Public Company Limited, ExxonMobil Limited, Thai Oil Public Company Limited, Bangchak Corporation Public Company Limited, PTT Global Chemical Public Company Limited, IRPC Public Company Limited, Star Petroleum Refining Public Company Limited. Distribution Channel Whenever the customers (major oil companies) would like to use services from the Group, the customers will directly contact the Group s commercial department. In addition, the Group also contact and coordinate indirectly with the customers through broker in Thailand and overseas. For backhauling transportation, the Group s commercial department will contact customers directlyincluding through broker in overseas to arrange the backhauling products. As a major shareholder of the Company, NAT acts as the representative of the Group in arranging the oil and petrochemical tankers to one of the customers, in which NAT charges the arrangement fees to the Group on the ordinary course of business and on the arm s length basis. Competition Oil and Petrochemical Tanker Business consists of few players as it is considered as capitalintensive business for investment in vessels and related equipment and high operating expenses such as bunkers expenses, personnel expenses, and insurance expenses. In addition, as the Oil and Petrochemical Tanker Business relates to transporting the products which are of very high value, customers normally require high quality service since the potential accidents, if occurred, will result in huge losses both in terms of the environment and life. Consequently, the service providers in the Oil and Petrochemical Tanker Business certainly require personnel who have experience and expertise in operation of oil and petrochemical transportation, understand and comply with relevant rules and regulation required by customers and domestic authorities such as Marine Department, Ministry of Transport, and international authorities regulating marine transportation services (such as International Maritime Organization (IMO), Oil Companies International Marine Forum (OCIMF), International Association of Classification Societies (IACS), and International Labour Organization (ILO) The Company has estimated that the Group s market share in transporting oil and petrochemical products is approximately 40.0% of Thailand s total volume and approximately 50.0% in terms of the Group s market share in domestic transportation for PTT Public Company Limited. From Thai Shipowners Association information in 2016, the Group is the largest oil and petrochemical tanker fleet in Thailand. (2) FSU Business The Group provide floating storage unit services by vessels with large storage unit ( FSU ), which the Group are obliged to 4

5 preserve the products to be in good condition and quality as well as the specified quantity in accordance with the agreed time period of the services. Due to increase in oil consumption in Asia Pacific region and limitation of land for construction of onshore tank terminal in Singapore, which is considered as a hub of oil trading in Asia, FSU is the substitute for oil storage by the oil trading companies. FSU allows for oil and petrochemical tankers to do ship to ship transfer, which results in reduction in port expenses and waiting time at ports and has no limitation of high tide. The products pertaining to FSU Business which the Group have expertise to provide services are crude oils and fuel oils. Target Customers and Distribution Channel Target Customers Type of Customers Domestic Customers International Customers Customer Characteristics Major oil companies that need FSU services due to increase in oil production and consumption Major oil companies in overseas countries that need FSU services in Singapore and Malaysia region Over the past three years, the Group s FSU Business has had only the group of customers in overseas countries. In 2016, the has entered the contract with one domestic major company to provide FSU services, which the Group have begun the services since 27 June Distribution Channel The Group directly contact with and provide FSU services to the domestic customers. The Group s commercial department, which are responsible for contacting, coordinating with, following up with the services provided to domestic customers, will make a contact to the customers and receive the request for services from the customers. For the international customers, the Group s commercial department and Nathalin Shipping Pte. Ltd. ( NSSG ) will make the contact to the customers and receive the request for services from the customers. Competition The Group s competitors in FSU Business are the group of companies operating FSU Business in the jurisdiction of Malaysia, where FSU is considered as an alternative to onshore tank terminal. At present, there are 18 FSUs in Tanjung Pelepas port, of which six are owned by the Group making the Group rank number one out of the companies operating FSU Business in Tanjung Pelepas port in terms of storage capacity. In addition, there are few companies mainly operate FSU Business such as China Shipping and Sentek Marine, while there are many companies operating in onshore terminal tank business in Singapore such as Universal Terminal. Vopak, and Oil Tanker. Furthermore, FSU as of 30 June 2017, the Group is the only service provider of FSU Business in Thailand, and the Group have already begun FSU services with FSU (VLCC) since 27 June 2017 in Koh Si Change, Si Racha, Chonburi. (3) Offshore Business The Group provide offshore services to the group of oil exploration and production companies covering FSO Business and AWB business and anchor handling tug business. Target Customers and Distribution Channel 5

6 The Group s target customers in Offshore Business are oil exploration and production companies, which operate oil exploration and production. Also, the Group s commercial department continuously contact and co ordinate with the target customers to be informed of the customers requirement and provide the corresponding services in due time. Competition Offshore Business consists of few players as it is considered as capital intensive business for investment in vessels and related equipment and high operating expenses such as bunkers expenses, personnel expenses, and insurance expenses. (4) Ship Management Business The Group provide ship management services to FSU FSO, AWB vessels, and crew boat to ensure that the operation is complied with relevant rules and regulations and is in accordance with the agreement with the customers. The scope of services of Ship Management Business covers technical management, crew management, and operational management to ensure the safety of operation of the personnel, products, and the vessels in consideration of the environment. Target Customers and Distribution Channel The Group s Ship Management Business s target customers are the group of companies that operate Oil and Petrochemical Tanker Business, FSU Business, and Offshore Business. At present, the Group mainly provide ship management services to the companies under the Group. Competition The Group mainly provide ship management services to the companies under the Group, in which the services provided to the customers are of the same nature as the services that the Group provided to companies under the Group. Sources of Supply In providing marine logistics services and floating storage unit services, the Group are required to procure raw materials and key supplies including (1) marine logistics service agreement (2) vessels) (3) sourcing of ship management service provider (4) bunker (5) sourcing of crew and (6) vessel maintenance as follows. Marine Logistics Service Agreement The channels of the Group to receive the service agreement include 1) bidding process 2) direct contact 1. In terms of bidding, the Group will join the bidding process, in which prior to the bidding the Group will analyze the Term of Reference ( TOR) and evaluate the project s return. In case there is the chance of winning the bidding with appropriate project s return, the Group will approve the joining of the bidding process and prepare the proposal to the customers or the organizations. 2. In case of the direct contact, the Group directly receive the request for services from the customers from the service agreement and service requisition. However, whether the Group will proceed in form of the agreement or service requisition depends on the type of services provided, i.e., spot charter (SPOT), Contract of Affreightment (COA), or time charter (TC). Vessel Sourcing The Group will source the vessels that is compatible with the customers requirement, which can be classified into marine transportation services and floating storage unit services. For the marine transportation services, the customers will provide important details such as type of products, product quantities, port of origin and destination port, and date and time for transportation. For floating storage unit services, the customers will also send the important details such as type of products, product quantities, area of the floating unit, and period of services in which the Group have 3 methods of providing the services including 1) purchase of 2 nd hand vessel 2) new built of vessel and 3) sourcing vessels from companies outside the Group. Sourcing of Ship Management Company 6

7 The Group source the ship management services from the companies under the Group including Nathalin Management Co., Ltd. ( NMC ), Nathalin Shipping Pte. Ltd ( NSSG ) and TIM Ship Management ( TIM ) The Group will consider the ship management services on basis of different expertise and specialization. NMC is specialized in providing services to oil and petrochemical tankers and crew boat; NSSG is specialized in providing services to FSU; and TIM is specialized in providing services to FSO vessels and domestic oil and petrochemical tankers. Bunker Bunker is one of the important factors for the Group s business operation as all types of the Group s vessels are to use bunker for the vessel s engine. Thus, the Group place an important to sourcing good quality bunker with decent pricing. The Group source bunker from leading oil trading companies in both Thailand and overseas countries which are in the Group s approved list which the Group have inspect the quality and standard to ensure that the bunker is of the good quality for the vessels engine. Furthermore, the Group have procedure of bunker purchase that ensures the Group will get the bunker that has appropriate price, in which the Group will contact at least two vendors to inquire for the pricing and inform those vendors of the quantities, type of bunker, and place of delivery to compare the pricing for the authorized to consider for approval. Afterwards, the sale team will contact those oil trading companies to further inform the details for delivery. The Group is able to source bunker at convenience as there are many suppliers or the oil traders per section 7 in the industry. In 2016, the Group sourced bunker from many parties such as Sea Oil Public Company Limited, PTT Public Company Limited, Bangchak Corporation Public Company Limited, and Chevron Thailand Exploration and Production Company Limited. Sourcing of Crew The Group recruit personnel and crew who have experience and specialization in operation in the vessels as the Group operate the businesses that relate to products that are of high value and may affect the environment. In addition, the Group are obliged to strictly comply with relevant rules and regulations instructed by such international bodies as International Maritime Organization (IMO) and governmentrelated authorities. The Group source and recruit personnel and crew through various channels including job announcement to job center of Merchant Marine Training Center and various marine schools such as Asian Maritime Technological College, journals relating to maritime operation, the employees under the Group, websites, and such social media as Facebook and Line. Vessel Maintenance In order for the Group to provide maritime transportation services and floating storage unit services consistently and efficiently in accordance with requirement by the IMO on the safety of vessel s operation and Marine Department, the Group plan the maintenance schedule which can be classified into 1) preventive maintenance and 2) dry docking From 2017 to 2018, the Group have dry dock schedule as follows. Type of Vessels No. of Vessel Due for Dry Docking Oil and Petrochemical Tankers 4 6 FSU Vessels 1 Offshore Vessels Total 4 7 7

8 Summary of key contracts and terms (1) Key agreement summary related to the Group s business Agreement types 1. FSU service agreement ( mostly providing service for Singapore entities by NSSG) Terms Renewal condition Agreement termination Key terms and conditions (Approximately) 6 12 months Most of service Termination clauses are stated as in the agreement including Most of agreements stated that agreement stated that in the case that either party appoints the liquidator or asset NSSG agreed to service FSU for the charterer. Each prior to the expiration of guardian or any person acting in charge of managing all agreement stated the designated oil storage volume the agreement no less assets or partial asset for debtor or falls into bankruptcy or NSSG agreed to charge the Storage Fee by calculating than 60 days, the cannot repay debt, the other party can terminate the the transportation and storage volume with Metric Ton charterer may give agreement. and Fixed Capacity per month and other related service letter of intent for from the charterers such as Inter Tank Transfer and renewing agreement to Blending by AirAgitation NSSG NSSG warranted that NSSG has the right to provide service to the charterers and FSUs are complied with The International Association of Classification Societies ( IACS ) NSSG will take that the completion of loading the products is done after the products pass Connecting flange from the charterer s vessels to FSU NSSG agreed to have the insurance for damage that may incur during the transportation service, however, it would not include product claim from product damage from normal operation s risk. The charterer has the ownership over the product all time during the transportation period The charterers agreed to appoint the independent surveyor to check quality and quantity of loading and 8

9 Agreement types 2. Time Charter agreement for marine transportation service ( providing service by chartering from NSSG) Terms (Approximately) Renewal condition Agreement termination Key terms and conditions 4 6 months Most of agreement stated that the charterers may give intent to terminate the agreement to NSSG ( ship owner position) by giving written letter in the case of the following incidents: The charterers cannot benefit from the use of vessels (Offhire period) The chartered vessels according the agreement are missing The chartered vessels are controlled by officials due to legal action been taken or illegal act discharge. The charterers are responsible for the independent surveyor expense The charterers agreed to be responsible for taxation related to product transported solely The charterers cannot transfer right and duty or subcharter the vessels to external parties except receiving the consent from NSSG Most agreements specify the shipping products and trading area clearly including determining on the important matters as followings: During the period of the agreement, there are changes not allow which are vessel ownership, vessel structure, vessel flag nationality, classification registration including changes in ship management company, except receiving consent from the charterers NSSG is responsible for reporting accident related to vessels and environment to the charterers monthly NSSG must review related operation under the designated agreement such as the vessel s commander operation, vessel officials or crews whether the operation is complied with the law and regulation by auditing which starts from the date of vessel delivery and during the chartering period.. 9

10 Agreement types 3. ShiptoShip Transfer License Service Agreement for NSSG Terms (Approximately) Renewal condition Agreement termination Key terms and conditions 2 years The parties may agree to renew this Ship to Ship Transfer License Agreement when a representative in Malaysia is authorized by a government agency in Malaysia to continue operating the FSU for a certain period of time. Most of agreements stated that NSSG has the right to terminate the agreements by sending a written letter to the agent when any of the following occurs: Related government agencies in Malaysia cancel the approval for agent to operate FSU per the agreement. The agent breaches the agreements The agent has the right to terminate the agreements by sending a written letter to NSSG when any of the following occurs: NSSG defaults in paying the operation fees per agreement or NSSG breaches the agreements NSSG agreed that the employment contract of the vessel officials and crews must be per law and regulation. The charterers may subcharter the vessels to external parties. However, the charterers have duty and are responsible as per the agreement with NSSG. Therefore, if the charterers desire to transfer right to others, the charterers must be given consent by NSSG. NSSG agreed to hire Malaysian agents licensed to operate FSU in Malaysia and to contact the officials of the relevant Malaysian government to allow NSSG to transport oil in Malaysia per the area that the government agency has authorized. The FSU must be designated by NSSG for operation. The agent is the one to request for permission to take vessels to the dock and leave the port including loading and unloading products from the vessels, as well as the preparation of documents such as customs, occupational health checkpoints, immigration checkpoints with government agencies in Malaysia on behalf of NSSG. The agent has a duty to giving advice on taxation or local law and regulation to NSSG. Both parties may not transfer right and/or responsibility per the agreement to external parties except receiving the consent from the other party. 10

11 (2) Loan Agreements Agreements Parties to the agreements Long term loan amount (As at 30 June 2017) Long term loan agreements which are for the purpose to purchase of vessel, to invest in land and building for business operation Between the Company, subsidiaries of the Company and Financial institutions PRM Total loan amount USD 65.1 million and THB 91.2 million Loan due date: August 2021 N.T.L. Marine Co., Ltd. ( NTL ) Total loan amount THB 1,706.0 million Loan due date: May 2024 Singha Tanker Co.,Ltd. ( SHT ) Total loan amount USD 79.9 million Loan due date: March 2024 Loan Covenants In each loan agreements, loan covenants are identified as followings; The borrower agrees to maintain the DSCR ratio 1 (Debt Service Coverage Ratio) to be not less than times (depend on each financial institutions)ใ The borrower shall not create any obligation, debt or charge by way of borrowing from or guaranteeing any person to an extent that the Borrower s Debt to Equity Ratio 2 to be over (depends on each financial institutions) the range of times. Provided that such Debt to Equity Ratio must not be less than 0 (zero) including a net amount of loan from director/related companies and loan to related companies as part of Equity. In the case of the delay of the project or cost overrun and such cost exceed the financial accommodation granted by the Lender, the Borrower is obligate to invest in such exceeding amount to complete the project. The Lender does not have any obligation to provide any additional financial accommodation to the Borrower. In the case of a lack of liquidity and/or ability to repay the obligation and/or cost overrun the Borrower shall increase and fully paid up its registered capital and/or obtain financial accommodation from directors or related companies. In case of borrowing from directors or related companies, the Borrower must not repay the directors or related companies prior to repayment to the Lender The financial accommodation from directors or related companies would be recorded as subordinated debt. Immediately upon the occurrence of dispute or lawsuit to which the Borrower is a party or litigant, the Borrower shall notify the Lender in writing. The Borrower must notify the Lender no less than 30 days prior the dividend payment to the shareholders. The Borrower is able to pay the dividend under the following conditions 1) the payment of dividend does not affect the ability to repay the obligation and 2) the Borrower is not in default of repayment of 11

12 Remarks : the obligation and the Borrower must not transfer, sell, sub lease or create any obligation of the assets ( each loan for each vessel) except in the terns of general business operation or the disposal of the asset at the end of its useful life. The Borrower must transfer the rights of the letter of guarantee from shipyard to the Lender within 14 days after each loan drawdown. The Borrower shall notify the Lender in writing, prior to the additional purchase of any vessel. The Borrower must deposit the revenue generating from pledged vessel to the savings account that open with the Lender for a guarantee of loan repayment and the Borrower shall cause the granting of right to withdraw money from the deposit account as a security in favor of the Lender or granting the right to deduct the money from the deposit account to promptly repay debt (Pledge and Assignment of Accounts). The Borrower must provide the Hull &Machinery (All Risks) Insurance and Protection & Indemnity Insurance and such other insurances in the types and for the risks required. In doing so, the Borrower shall endorse the Lender for each Insurances as a beneficiary, except with respect to third party liability insurances. In addition, in the case that the Borrower operate its business in the War risk and Privacy area, that determined in accordance to the announcement of Lloyd s Register, the Borrower must provide the Wars and Privacy Insurance any change of the following events occurs A change of control of authorized person on behalf of the Borrower or A change of Memorandum of Association or Article of Associate or Company Stamp The Borrower must notify the Lender, in writing, within 15 days after the event occur and provide the supporting document 1 DSCR calculated from its earnings before interest, tax, depreciation and amortization (EBITDA) divided by current portion of long term debt (CPLTD) including interest expense on both longterm and shortterm loans 2 D/E calculated from total liabilities less loan from directors and related companies divided by shareholders equity added loan from directors and related companies and less loan to directors and related companies 12

13 Feasibility Study None Technical and Management Assistance None Future Projects The Group s future projects depend on many factors such as Vessel Market Condition for both new built vessels and second handed vessels, vessel market price including the economy, politics, society and related law and regulation. In addition, the group carefully considers the future project plan of the group. The future projects of the Group in the next 2 3 years are summarized as followings: (1) New built vessels to replace the existing vessels and to enhance efficiency and transportation volume The Group has future projects for new built vessels to replace the existing vessels which are nearly out of commission. The objectives of the vessel replacement are to increase in transportation volume from vessel size enhancement and increase in transportation volume per roundtrip for serving the continuously rise in oil consumption regionally and replacing Single Hull Vessels with Double Hull Vessel including the equipment set up complied with International Maritime Organization ( IMO ). Thus, the Group has the main mission to enhance efficiency in both quality and quantity in product transportation as well as to reduce maintenance and repair vessel cost, to increase in transportation rate per roundtrip and to reduce the average vessel fleet. In addition, the Group has future projects for Oil and Petrochemical Tankers with vessel size of 3,000 5,000 DWT, total of 4 vessels with total investment cost of 900 million Baht. The new built vessels will be ordered between year 2017 and 2018 of 3 and 1 vessels, accordingly. The expected time for building new vessels is approximately years. The Group has already ordered 3 new built vessels with vessel size of approximately 3,000 5,000 DWT, total investment cost of 820 million Baht. As ended June 30, 2017, the Group invested approximately 650 million Baht and expect to onhire these 3 new built vessels by From the above future projects, the Group expected that the increase in transportation volume for Oil and Petrochemical Tanker Business will be approximately 550 million Liters per year in the next 23 years. (2) Vessel Fleet Expansion The Group has future projects for vessel fleet expansion consists of Oil and Petrochemical Tankers, FSU and Offshore Vessels to ( 1) to enhance efficiency in both quality and quantity in product transportation with better Backhauling Management in some transportation routes including high growth potential in petrochemical tankers market (2) to expand to new transportation routes locally and internationally such as Thailand Myanmar route, Thailand China route, Thailand Japan route and ( 3) to expand from existing customer base, especially neighbor countries in South East Asia with high growth potential such as Myanmar which is under oil tank farm development in coastal towns. The Group viewed as good opportunities in order to expand customer base to Myanmar for Oil and Petrochemical Tanker Business to serve the growth potential in transporation volume from oil tank farm development and Offshore Business to support the increase in offshore s oil exploration and production. For year , the Group has important vessel fleet expansion plan as followings: (1) Oil and Petrochemical Tanker Business Expansion Plan Future projects for Oil and Petrochemical Tankers with vessel size of 3,000 10,000 DWT approximately 8 vessels consist of 3 new built vessels (order for new built vessels in 2019) and 5 second handed vessels (3, 1 and 1 vessels will be ordered for buying second handed vessels in year 2017, 2018 and 2019, accordingly) to serve Oil and Petrochemical Tanker Business growth 13

14 mostly for domestic market with total investment cost of 2,110 million Baht. The expected time for building new vessel is approximately years. The Group has already ordered 1 new built vessels with vessel size of approximately 3,000 DWT, total investment cost of 230 million Baht. As ended June 30, 2017, the Group invested approximately 130 million Baht and expect to onhire these 1 new built vessel by From the above future projects, the Group expected that the increase in transportation volume for Oil and Petrochemical Tanker Business will be approximately 3,800 million Liters per year in the next 23 years. Future projects for large Oil and Petrochemical Tankers approximately 11 second handed vessels consist of 1 vessel with vessel size approximately 14,000 DWT, 2 MR vessels, 3 LR2 vessels, 4 Aframax vessels and 1 VLCC vessel to serve Oil and Petrochemical Tanker Business growth mostly supporting FSU Business with total investment cost of 6,890 million Baht. The future projects for large Oil and Petrochemical Tankers are as followings: No. of vessels (vessels) Vessel size of appoximately 14,000 DWT Order time for second handed vessels Total 1 1 MR LR Aframax VLCC Note: 1 Medium Range (MR) with vessel size of 25,000 45,000 DWT 2 Long Range 2 (LR2) with vessel size of 80, ,000 DWT 3 Aframax with vessel size of 80, ,000 DWT 4 Very Large Crude Carrier (VLCC) with vessel size of 160, ,000 DWT From the above future projects, the Group expected that the increase in transportation volume for Oil and Petrochemical Tanker Business will be approximately 16,700 million Liters per year in the next 23 years. Therefore, from the above future projects of new built vessels to replace the existing vessels and to enhance efficiency and transportation volume and Oil and Petrochemical Tanker Business Expansion Plan, the Group expected that the increase in transportation volume for Oil and Petrochemical Tanker Business will be approximately 21,050 million Liters per year from 5,607 million Liters per year in 2016, totaling of approximately 26,660 million Liters per year in the next 23 years. (2) FSU Business Expansion Plan In year 2016, the Group has invested in Bongkot Marine Service Company Limited ( BONGKOT ) which is a newly established company with the Group holding 70% of paid up capital. BONGKOT invested in VLCC FSU in quarter 1 2 in year 2017 with total investment cost of 940 million Baht. The project is on hire in June, The Group also has significant FSU business expansion plan in year The Group will consider investment in second handed FSU in VLCC size to increase capacity in storing oil, totaling approximately 4 vessels in 2018 and 3 vessels in 2019 with total investment cost of approximately 4,200 million Baht to serve FSU Business growth potential in South East Asia. (3) Offshore Business Expansion 14

15 The Group has future projects of investing in second handed FSO in Aframax size total of approximately 2 vessels in 2018 with total investment cost of approximately 1,090 million Baht to serve oil exploration and production business growth potential for oil exploration and production companies in Thailand and South East Asia s neighbor countries. The Group has future projects of investing in Offshore Vessels during year such as Anchor Handling Tugs, Accommodation Work Barge to serve oil exploration and production business growth potential for oil exploration and production companies in Thailand and South East Asia s neighbor countries. 15

16 Related Transactions List of name/ corporate that may have conflict of interest Person who may have conflict of interest Relationship 1. NAT 1.1 Being PRM major shareholder holding 100% of issued and paidup capital 1.2 Having 4 mutual directors: 1) Mr.Prompong Chaisrisawatsuk 2) Mr.Suraphon Meesathien 3) Mr.Chanwit Anakkul 4) Mr.Surasak Chaiyen 2. N.A.T. Mart Co., Ltd. ( N.A.T. Mart ) 3. Seaoil Petroleum Co.,Ltd. ( Seaoil Petroleum ) 4. Seaoil Offshore Co.,Ltd. ( Seaoil Offshore ) 5. Sea Oil Public company Limited ( Sea Oil ) 2.1 Being NAT subsidiary s company, NAT hold 100% of issued and paidup capital 2.2 Mr. Praveen Panboonhom (a child of Mr.Chedchu Panboonhom and Ms.Vilaisri Panboonhom, who are major shareholder of NAT) is a director of N.A.T Mart 3.1 NAT being a major shareholder of Seaoil Petroleum. NAT indirectly hold 45.05% of shares of Seaoil Petroleum through Sea Oil Pcl. 3.2 Ms. Neeracha Panboonhom (a child of Mr.Chedchu Panboonhom and Ms.Vilaisri Panboonhom, who are a major shareholder of NAT) is a director of Seaoil Petroleum 4.1 NAT being a major shareholder of Seaoil Offshore. NAT indirectly hold 45.05% of shares of Seaoil Offshore through Sea Oil Pcl. 4.2 Ms. Neeracha Panboonhom (a child of Mr.Chedchu Panboonhom and Ms.Vilaisri Panboonhom, who are a major shareholder of NAT) is a director of Seaoil Offshore 5.1 NAT being major shareholder of Sea Oil, holding 45.05% of issued and paidup capital 5.2 Mr.Chedchu Panboonhom (a controlling shareholders) hold 10.60% of Sea Oil of issued and paidup capital 5.3 Ms. Neeracha Panboonhom (a child of Mr.Chedchu Panboonhom and Ms.Vilaisri Panboonhom, who are a major shareholder of NAT) is a director of Sea Oil 5.4 Having 2 mutual directors: 1) Mr.Suraphon Meesathien 2) Prompong Chaisrisawatsuk 16

17 The Company and its subsidiaries have related transaction between person who may have conflict of interest for fiscal year end on December 31, 2016 and for the sixmonth period on June 30, The significant transaction are as follows: Size of transaction (Baht) Person who may have Necessity and rationate of Opinion of Audit Committee Type of Transaction conflict of interest transactions Fiscal year ending December 31, 2016 Sixmonth period ending on June 30, Loan to person who may have conflict of interest 1. NAT 1.1 NMC provided loan to NAT Loan to Beginning amount Additional loan during period of Repayment during period of Ending amount Interest income 1.2 NTL provided loan to NAT Loan to Beginning amount Additional loan during period of Repayment during period of Ending amount Interest income 5,000,000.0 (5,000,000.0) 33, ,000,000.0 (35,000,000.0) 63, ,000,000.0 (10,000,000.0) 11, ,000,000.0 (20,000,000.0) 23,408.2 For fiscal year of 2016 and sixmonth period of 2017 NMC provided loan to NAT for a purpose of working capital NAT repaid all loan and interest to PRM for fiscal year of 2016 on March 29, 2016 and sixmonth period of 2017 to PRM on February 28, 2017 The interest rate charged at 7.37 per annum and 7.12 per annum for the fiscal year of 2016 and sixmonth period of 2017, respectively. The rate is comparable to NAT s overdraft rate For fiscal year of 2016 and six month period of 2017 NTL provided loan to NAT for a purpose of working capital NAT repaid all loan and interest to PRM for fiscal year of 2016 on March 29, 2016 and sixmonth period of 2017 on February 28, 2017 The interest rate charged at per annum and 7.12 per annum for the fiscal year of 2016 and sixmonth period of 2017, respectively. The rate is The interest rate used between two parties is reasonable Audit committee opined that the Company should not enter into any borrowing/lending agreement with its related parties in the future The interest rate used between two parties is reasonable Audit committee opined that the Company should not enter into any borrowing/lending agreement with its related parties in the future 17

18 Person who may have conflict of interest Type of Transaction Fiscal year ending December 31, 2016 Size of transaction (Baht) Sixmonth period ending on June 30, 2017 Necessity and rationate of transactions comparable to NAT s overdraft rate Opinion of Audit Committee 1.3 SHT provided loan to NAT Loan to Beginning amount Additional loan during period of Repayment during period of Ending amount 40,000,000.0 (40,000,000.0) SHT provided loan to NAT for a purpose of working capital NAT repaid all loan and interest on February 28, 2017 The interest rate charged at per annum. The rate is comparable to NAT s overdraft rate The Audit Committee approved the appropriateness of interest rate. Audit committee opined that the Company should not enter into any borrowing/lending agreement with its related parties in the future Interest income 46, Transaction of loan from person who may have conflict of interest NAT Loan from NAT Loan from Beginning amount Additional loan during 57,000,000.0 period of Repayment during period of Ending amount 57,000, ,000,000.0 (57,000,000.0) NAT provide to PRM for a purpose of working capital NAT charged interest at rate of per annum. The rate is comparable to NAT s overdraft rate PRM repaid all loan on February 21, 2017 The Audit Committee approved the appropriateness of interest rate. Audit committee opined that the Company should not enter into any borrowing/lending agreement with its related parties in the future Interest income 57, ,

19 Person who may have conflict of interest Type of Transaction Fiscal year ending December 31, Normal business transaction with person who may have conflict of interest 1. NAT NAT hired NTL vessel and NAT acted as an agent Trading business income Trade account receivable Size of transaction (Baht) 21,684, ,032,779.3 Sixmonth period ending on June 30, ,088, ,203,353.9 Necessity and rationate of transactions NAT acted as an agent and contracted with end customers NAT hiring NTL s vessel to service its customer The rate charged is accordance to rate that NAT agreed with its end user less with agent service fee which is comparable to what other non related agents charged The terms and condition are comparable to similar business transaction Opinion of Audit Committee Audit Committee approved the appropriateness of business terms of these transactions as they were beneficial to the Company and the reasonableness of price. 2. Seaoil Petroleum The Company and its subsidiaries purchased fuel from Seaoil Petroleum 2.1 the Company Fuel cost Trade account payable 2.2 NTL Fuel cost 1,404, , , ,554,179.8 PRM and NTL purchased fuel and lubricant products from Seaoil Petroleum for trading vessels NSSG purchased fuel and lubricant products from Seaoil Petroleum for FSU vessels The price is at market rate and terms and conditions are general trading conditions of the business Audit Committee approved the appropriateness of business terms of the transaction and the reasonableness of price. 2.3 NSSG Fuel cost 29,706, ,510, Seaoil Offshore 3.1 PRM provided trading PRM provided oil trading service ( fuel Audit Committee approved the 19

20 Person who may have conflict of interest Type of Transaction Fiscal year ending December 31, 2016 Size of transaction (Baht) Sixmonth period ending on June 30, 2017 service to Seaoil Offshore Trading business income 2,512,580.0 The Company and its subsidiaries purchased fuel from Seaoil Offshore 3.2 the Company Fuel cost 2,158, ,396,041.9 Necessity and rationate of transactions and lubricants products) to Seaoil Offshore The service fee is comparable to what the Company charged to other customers that use similar trading route and terms and conditions are general trading conditions of the business PRM and its subsidiaries purchased fuel and lubricant products from Seaoil Offshore for trading vessels The price is at market rate and terms and conditions are general trading conditions of the business Opinion of Audit Committee appropriateness of business terms of the transaction and the reasonableness of price. Audit Committee approved the appropriateness of business terms of the transaction and the reasonableness of price. 3.2 NTL Fuel cost Trade account payable 4,007, ,310, , Thai Marine Tanker Co., Ltd. ( TMT ) Fuel cost Trade account payable 4. Sea Oil The Company and its subsidiaries purchased fuel from Sea Oil 1,950,650.6 PRM and its subsidiaries purchased fuel and lubricant products from Sea Oil for trading vessels Audit Committee approved the appropriateness of business terms of the transaction and the 20

21 Person who may have conflict of interest Type of Transaction 4.1 the Company Fuel cost Trade account payable Fiscal year ending December 31, 2016 Size of transaction (Baht) 8,139, ,688,460.0 Sixmonth period ending on June 30, ,559, ,830.0 Necessity and rationate of transactions The price is at market rate and terms and conditions are general trading conditions of the business Opinion of Audit Committee reasonableness of price. 4.2 NTL Fuel cost Trade account payable 139,675, ,307, ,768, ,368, TMT Fuel cost Trade account payable 632, , General Business Transaction 1. NAT 1.1 PRM paid management service fee to NAT Others service fee Other account payable 11,252, ,018, ,536, ,826,766.8 PRM paid main service fee to NAT as follows: Management Information System fee of THB 480,600 per month VRM Management THB 316, per month Human Resource Management fee THE 289,014 per month PRM hired NAT legal department that have an expertise on Maritime law to provide a service related to legal Audit Committee approved the appropriateness of business terms of these transactions as they were beneficial to the Company and the reasonableness of price. 21

22 Person who may have conflict of interest Type of Transaction 1.2 BSC paid Management Information System and Human Resource Management fee to NAT Others service fee Other account payable Fiscal year ending December 31, 2016 Size of transaction (Baht) 1,343, ,288.2 Sixmonth period ending on June 30, , ,665.7 Necessity and rationate of transactions document at rate of THB 3,500 hour The rate of these transactions is determined by a cost plus pricing method and is comparable to what other non related service providers charged In 2017, PRM rented a car from NAT with a price at market rate and terms and conditions are general trading conditions of the business BSC paid main service fee to NAT as follows: Management Information System fee of THB 48,060 per month VRM Management THB 16,500 per month Human Resource Management fee THE 46,508 per month BSC hired NAT legal department that have an expertise on Maritime law to provide a service related to legal document at rate of THB 3,500 hour The rate of these transactions is determined by a cost plus pricing method and is comparable to what other non related service providers charged Opinion of Audit Committee Audit Committee approved the appropriateness of business terms of the transaction and the reasonableness of price. 22

23 Person who may have conflict of interest Type of Transaction 1.3 NMC paid others service fee to NAT Others service fee Other account payable 1.4 NTL paid Loan Guarantee fee to NAT Fiscal year ending December 31, 2016 Size of transaction (Baht) 3,831, ,351.0 Sixmonth period ending on June 30, ,144, ,187,723.5 Other service fee 3,442, ,721,450.0 Necessity and rationate of transactions NMC paid main service fee to NAT as follows: Management Information System fee of THB 170,880 per month VRM Management THB 46,500 per month Human Resource Management fee THE 79,728 per month NMC hired NAT legal department that have an expertise on Maritime law to provide a service related to legal document at rate of THB 3,500 hour The rate of these transactions is determined by a cost plus pricing method and is comparable to what other nonrelated service providers charged In 2017, NMC rented a car from NAT with a price at market rate and terms and conditions are general trading conditions of the business NAT being a loan guarantor for loan from financial institution of NTL NAT provided a loan guarantee to NTL NAT charged the Loan Guarantee fee referral to a Loan Guarantee Agreement at the rate of 0.2% on the outstanding balance as a document Opinion of Audit Committee Audit Committee approved the appropriateness of business terms of the transaction and the reasonableness of price. Audit Committee approved the appropriateness of business terms of the transaction and the reasonableness of price. 23