The Opinion of Independent Financial Advisor

Transcription

1 Attachment 3 The Opinion of Independent Financial Advisor CH. Karnchang Public Company Limited On the Disposition of Assets Transaction Regarding the Disposal of the Ordinary Shares in Thai Tap Water Supply Public Company Limited By Trinity Advisory 2001 Company Limited January 21, 2013

2 Table of Content Executive Summary 3 Page Section 1 General Characteristics of the Transaction 1.1 Objective of the Transaction 1.2 Transaction Period 1.3 Involved Parties and Relationship with Listed Company 1.4 Total Value of the Transaction 1.5 Type and Size of the Transaction Section 2 Details of Disposed Assets 2.1 Thai Tap Water Supply Public Company Limited Section 3 General information of the Seller and the Buyer 3.1 CH. Karnchang Public Company Limited the Company / Seller 3.2 Bangkok Expressway Public Company Limited Buyer Section 4 Reasonableness of the Transaction 4.1 Objective of the Transaction 4.2 Advantages and Disadvantages from Entering into the Transaction 4.3 Advantages and Disadvantages from Not Entering into the Transaction Section 5 Appropriateness of the Transaction s Price and Conditions 5.1 Book Value Approach 5.2 Adjusted Book Value Approach 5.3 Volume Weighted Average Market Price Approach 5.4 Market Comparable Approach Price to Book Ratio Approach Price to Earnings Approach EV/EBITDA Approach 5.5 Discounted Cash Flow Approach- DCF 5.6 Summary of Share Valuation 5.7 Appropriateness of the Transaction s Price 5.8 Appropriateness of the Transaction s Conditions Section 6 Opinion of the Independent Financial Advisor 98 CH. Karnchang Public Company Limited

3 The Company or CK TTW PTW TWO CKP SEAN NN2 BKC NRS CRS BIC BECL BLDC EDL RATCH PTT PWA EGAT PEA IEAT Trinity or the IFA SET SEC The Notification of Acquisition or Disposal of Assets Abbreviations CH. Karnchang Public Company Limited Thai Tap Water Supply Public Company Limited Pathum Thani Water Company Limited Thai Water Operations Company Limited CK Power Limited SouthEast Asia Energy Limited Nam Ngum 2 Power Company Limited Bangkhenchai Company Limited Nakhon Ratchasima Solar Company Limited Changrai Solar Company Limited Bangpa-in Cogeneration Limited Bangkok Expressway Public Company Limited Bangpa-in Land Development Company Limited Electricite du Laos Ratchaburi Electricity Generating Holding Public Company Limited PTT Public Company Limited Provincial Waterworks Authority Electricity Generating Authority of Thailand Provincial Electricity Authority Industrial Estate Authority of Thailand Trinity Advisory 2001 Company Limited The Stock Exchange of Thailand The Securities and Exchange Commission The Notification of the Capital Market Supervisory Board No. Tor Chor. 20/2551 Re Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand Re Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets B.E (2004) CH. Karnchang Public Company Limited

4 -TRANSLATION- The English Translation of the Independent Financial Advisor s Opinion has been prepared solely for the convenience of foreign shareholders of CH. Karnchang Public Company Limited and should not be relied upon as the definitive and official document. The Thai language version of the Independent Financial Advisor s Opinion is the definitive and official document and shall prevail in all aspects in the event of any inconsistency with this English Translation January 21, 2013 Re To Opinion of the Independent Financial Advisor on disposition of assets regarding to the disposal of ordinary shares of Thai Tap Water Supply Public Company Limited Shareholders of CH. Karnchang Public Company Limited With regards to the Board of Directors Meeting of CH. Karnchang Public Company Limited (the Company or CK ) No. 6/2012 on December 19, 2012, the Board of Directors of the Company passed a resolution to approve the transaction regarding the disposition of 438,900,000 ordinary shares of Thai Tap Water Supply Public Company Limited ( TTW ), representing 11.00% of registered and paid-up capital, at THB 7.55 per share, total value of THB 3,313,695,000 to Bangkok Expressway Public Company Limited ( BECL ) and proposed to have the Transaction considered for approval by the Company s shareholders meeting in the Extraordinary General Meeting of Shareholders ( EGM ) No. 1/2013, which will be held on February 5, However, by entering into the Transaction, the Company will decrease in shareholding in TTW shares from 30.04% to 19.04% of registered and paidup capital. Moreover, this Transaction shall be deemed as a disposition of assets transaction as prescribed in The Notification of the Capital Market Supervisory Board No. Tor Chor. 20/2551 Re Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and the Notification of the Board of Governors of the Stock Exchange of Thailand Re Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets B.E (2004) (the Notification of Acquisition or Disposal of Assets ). Total value of the Transaction is THB 3,313,695,000 is equal to %, obtained the maximum value from the calculation of the transaction size via net profit basis in accordance with the Notification of Acquisition or Disposal of Assets. Such transaction is classified as Type 1 Transaction. The Company is required to disclose details of the Transaction to the Stock Exchange of Thailand (the SET ) and seek approval from shareholders meeting with affirmative votes of not less than three-fourths of the total number of votes of the shareholders attending the meeting and having the rights to vote, excluding the votes of the shareholders with conflict of interest. Moreover, an independent financial advisor shall be appointed in order to provide an opinion to the Company s shareholders regarding the reasonableness of the Transaction, the appropriateness of the Transaction s price and conditions as well as CH. Karnchang Public Company Limited Page 1

5 a recommendation as to whether the shareholders resolve to agree or disagree with the Transaction with supporting rationales. According to the Notification of Resolutions of the Board of Directors Meeting No. 6/2012 on December 19, 2012, the Board of Directors of the Company has approved the appointment of Trinity Advisory 2001 Company Limited ( Trinity or the IFA ) to be the independent financial advisor of the Company in rendering opinion regarding the disposition of assets transaction. And Trinity is approved as a financial advisor by the Office of the Securities and Exchange Commission ( SEC ) and does not have a relationship with the Company, its subsidiaries, its related companies as well as a related counterparty of the Transaction, who affect to the independence in rendering opinions to the shareholders. The IFA has rendered its opinion with reference to the following sources of information 1) Notification of Resolution of the Board of Directors Meeting No. 6/2012, which was held on December 19, 2012 and Information Memorandum on Disposition of Shares in Thai Tap Water Supply Public Company Limited; 2) Information and documents obtained from the Company and its related companies including from interviews with the management and its assigned working team; 3) Information and documents obtained from various advisors of the Company and related companies; 4) Information of the Company and its related companies that are publicly disclosed such as annual reports, financial statements, annual disclosure forms and information in the SET; The IFA s opinion is based on the assumptions that all documents and information including the information obtained from interviews with the management of the Company and related companies, their assigned working teams and the publicly disclosed information that are used in the analysis in rendering the opinion in this report are accurately correct and currently perceivable on the date of this report. In case there are any changes or material events that may significantly affect the business operations and share valuation of TTW, which may affect the shareholders discretions to approve the Transaction. Shareholders may consider information, rationale and opinions on various issues stated herein this IFA report in consideration to cast the vote for approval of the Transaction. However, shareholders should use their own judgements with their discretion over the decisions regarding this approval. The IFA renders opinion for the disposition of assets transaction of the Company on January 21, With respect to interests of the Company s minority shareholders, the IFA shall affirm that all information as mentioned above has been thoroughly studied and cautiously analyzed with the prudent discretion of general accepted standards of practices. CH. Karnchang Public Company Limited Page 2

6 Executive Summary CH. Karnchang Public Company Limited (The Company or CK ) intends to sell partially of its investment in Thai Tap Water Supple Public Company Limited ( TTW ) to Bangkok Expressway Public Company Limited (the Transaction ). The proposed amount shall be 438,900,000 of ordinary shares in TTW, accounting for 11.00% of registered and paid-up capital at THB 7.55 per share. Total value of the Transaction shall be amounted to THB 3,313,695,000. The selling price is determined from discount of 5% from the average price for the past 60 business days up to December 17, 2012 on which both the contractual parties concluded their negotiation. BECL (buyer) shall make payment by cashier s cheque or transfer cash via banking system on the Transaction date in the amount of THB 2,200,000,000. BECL shall make the remaining payment of THB 1,113,695,000 by April The payment shall be made into 5 installments, with semiannual basis of THB 200,000,000 each. The first payment shall be made within April 2013, whereas the last one shall be made within April This Transaction on disposal of TTW shares shall be deemed as a disposition of assets transaction as prescribed in Notification of Acquisition or Disposal of Assets. With the reference to consolidated financial statements of the Company and TTW for the period ended September 30, The transaction size is equal to %, obtained the maximum value from the calculation via net profit basis in accordance with the Notification of Acquisition or Disposal of Assets. Such transaction is classified as Type 1 Transaction. The Company is required to disclose details of the transaction to the SET and seek approval from shareholders meeting with affirmative votes of not less than three-fourths of the total number of votes of the shareholders attending the meeting and having the rights to vote, excluding the votes of the shareholders with conflict of interest, according to the Notification of Acquisition or Disposal of Assets. For consideration of the reasonableness of the Transaction s Price of THB 7.55 per share, the IFA uses 2 approaches including the DCF and the volume weighted average market price. The DCF approach is derived from the DCF-based share value of each business unit (Sum of the Parts). The volume weighted average market price approach is conducted by the weighted averages of the close prices for the past 6 months to reflect TTW s current fundamentals. The IFA views that the proposed Transaction s Price of 7.55 per share is reasonable. The fair value of TTW based on the DCF approach is THB 7.45 per share and the fair values of TTW based on the volume weighted average market price are range between THB 7.33 to 8.64 per share. It is higher than the fair value of THB 7.45 per share by THB 0.10, or 1.34% higher. In addition, the Transaction s Price of THB 7.55 per share is higher than the fair value of THB 7.33 per share by THB 0.22, or 3.00% higher, and lower than the fair value of THB 8.64 per share by THB 1.09, or 12.62% lower. The IFA performs the sensitivity analysis using key factors that significantly affect the equity values of TTW PTW and NN2. The result shows that the equity values of TTW are range between THB 7.26 to 7.63 per share; therefore, the Transaction s Price of THB 7.55 per share is in the range based on the sensitivity analysis. CH. Karnchang Public Company Limited Page 3

7 In addition, the IFA conducts sensitivity analysis in order to evaluate share price. The result shows that the equity values of TTW are range between THB 7.26 to 7.63 per share; therefore, the Transaction s Price of THB 7.55 per share is in the range of the sensitivity analysis. However, the Transaction s Price of THB 7.55 per share is lower than the volume weighted average market price of THB 8.64 per share by THB 1.09, or 12.62% lower. The disposition of shares in TTW may lower profits compared with sales of the shares through the SET. The IFA considers average daily trading volumes of TTW, traded on the SET over the past one year until December 19, 2012, is 3,978, shares. The disposition of 438,900,000 shares in TTW may take long time, approximately 110 days. As a result, the sales of the shares through the SET may potentially be affected by the degree of uncertainty in terms of future share prices and trading volumes. The IFA preferably uses the values obtained from the DCF approach for consideration of appropriateness of the Transaction s Price; since, cash inflows and cash outflows of TTW and its subsidiaries and associated companies can be precisely projected among contracts including purchasing agreements, operation and maintenance agreements, concessions and loan agreements. As a result, the equity values of TTW using the DCF approach are range between THB 7.26 to 7.63 per share. The Transaction s Price of THB 7.55 per share is higher than the equity value of THB 7.26 per share by THB 0.29, or 3.99% higher, and lower than the equity value of THB 7.63 per share by THB 0.08, or 1.05% lower. The IFA considers Transaction s conditions for an apropriateness of the payment condition in accordance with Draft of the Share Pruchase Agreement. The Company shall receive the payment on the Transaction date in the amount of THB 2,200,000,000 or 66.39% of the total amount. It shall make the remaining payment of THB 1,113,695,000 or 33.61% of the total amount by April The payment shall be made into 5 installments, THB 200,000,000 each as mentioned. This condition shall support the Company to sell all of proposed amount at once. As a result of the transaction on disposition of TTW shares, the Company will enhance liquidity and strengthen its capital structure. The Company shall lower its debt to equity ratio ( D/E ratio ) and net debt to equity ratio to an appropriate level in order to support new business opportunity with the competitive financial cost. By selling 11.00% of TTW shares, the Company shall realize gain on sale of the investment in TTW, amounting to approximately THB 2,221,000,000, whilst the value of remaining portion of 19.04% in TTW shall be booked by fair value and realized as accounting profit, estimating at approximately THB 4,795,000,000. Moreover, the Company shall use cash, received from sale of TTW, for repaying some debt and working capital in the business.the Company shall repay some debts with the amount of THB 1,723,000,000 (net from tax on gain in the investment from THB 2,200,000,000). Moreover, the Company shall use the remaining amount of THB 1,113,695,000 as its working capital in the business. In this respect, the liabilities are decreased, whereas the shareholders equity is increased. The Company shall obtain the ultimate objectives from selling all of proposed amount at once, where the capital structure is strengthen. The Company shall reduce current D/E ratio of 5.33x to an estimated D/E of 2.80x and the net debt to equity ratio of 2.64x to an estimated net debt to equity ratio of 1.33x. CH. Karnchang Public Company Limited Page 4

8 With reference to the installment period between the Contractual Parties, the IFA considers an opportunity the Company may gain an interest income of the remaining payment of THB 1,113,695,000 from bank deposits, The Transaction will take place in 2013 after the Transaction is approved from the Shareholders Extraordinary General Meeting of the Company and BECL on February 5 and February 6, 2013, respectively. The IFA conducts an average interest rate of 3.22% based on the maximum fixed deposit interest rates of 3 months, 6 months and 12 months from the BOT. The result gives that the Company may lose an opportunity to gain the interest income from the remaining payment by THB 48,000,000 or 1.45% of the total transaction value of THB 3,313,695,000 or THB 0.10 per share. The equity value of TTW after subtracting the opportunity cost of THB 0.10 per share is THB 7.45 per share, equal to the fair value of TTW using the DCF approach and in the range between THB 7.26 to 7.63 per share using the sensitivity analysis. The Contractual Parties concluded their negotiation that the seller has to transfer equity right in TTW to BECL (buyer) at the date of agreement or the date that the seller receives THB 2,200,000,000. Based on Transaction Conditions, if BECL could not make the payment, the Company shall sue BECL under law. However, BECL is a listed company and performs a strong financial position. TRIS Rating affirmed the company rating of BECL at A as of September 26, Moreover, when considering the BECL s Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) in 2012 from annualized 9-month-financialstatement ended September 30, 2012, BECL s EBITDA was THB 7,000,000,000 roughly with debt due within a year at THB 5,000,000,000 BECL has potential to meet the term of payment. The IFA considers the fairness of the Transaction s Price, Transaction s Conditions and benefits for the Company. The IFA gives that the Transaction s Conditions are reasonable. With the reason regarding previously, the IFA recommends that the shareholders approve the Company to enter into the Transaction. Notwithstanding, the decision to vote in the shareholders meeting is solely dependable on the consideration and at the discretion of the shareholders. Shareholders should take the advantages, disadvantages and risks of the transaction as well as to carefully consider the documents attached herewith into consideration so as to make the most appropriate decision. The IFA renders opinion for the disposition of assets transaction of the Company. With respect to interests of the Company s minority shareholders, the IFA shall affirm that all information as mentioned above has been thoroughly studied and cautiously analyzed with the prudent discretion of general accepted standards of practices. CH. Karnchang Public Company Limited Page 5

9 Section 1 General Characteristics of the Transaction CH. Karnchang Public Company Limited (the Company or CK ), as a seller, mainly engages in construction business. The Company intends to sell an investment in Thai Tap Water Supply Public Company Limited ( TTW ) which engages in water production and distribution to the Provincial Waterworks Authority ( PWA ). TTW has expanded to engage in energy and environment businesses, namely waste water treatment and waste disposal. Regarding energy business, TTW holds 30.00% of registered capital in CK Power Limited ( CKP ), established to operate as a holding company with the objective to restructure the investment portfolios in energy sector. CKP has an investment in SouthEast Asia Energy Limited ( SEAN ) who holds 75.00% of total shares of Nam Ngum 2 Power Company Limited ( NN2 ). NN2 engages in generate and distribute electricity from hydro energy under concession, granted by The Lao People's Democratic Republic ( Lao PDR ). Moreover, CKP has an investment in Bangkhenchai Company Limited ( BKC ) Nakhon Ratchasima Solar Company Limited ( NRS ) and Changrai Solar Company Limited ( CRS ) who engage in operating power plant to generate electricity from solar energy and distribute to Provincial Electricity Authority ( PEA ) at the shareholding of %, 30.00% and 30.00% of total shares, respectively. Furthermore, CKP holds of 46.00% of total shares in Bangpa-in Cogeneration Limited ( BIC ), a small power producer from cogeneration power system. Its electricity will be distributed to Electricity Generating Authority of Thailand ( EGAT ) 1.1 Objectives of the Transaction The Company intends to sell 438,900,000 of ordinary shares in TTW, with a par value of THB 1 each, at THB 7.55 per share. Total value of the Transaction shall be amounted to THB 3,313,695,000. As a result of the transaction on disposition of TTW shares, the Company shall increase liquidity. Received cash from sale of TTW shares can be used as working capital in the business, to repay debts and to support the future investment. Moreover, the Company shall realize gain on sale of investment in TTW shares. In addition, since shareholding in TTW will be decreased by 11.00% of registered and paid-up capital to 19.04%, the Company shall reclassify the investments in TTW from an investment in associate to availablefor-sale investments, and the Company has changed the value of investment method from the equity method to the fair value. In this respect, such fair value shall be calculated based, on the latest buying price as at the end of the period of the Stock Exchange of Thailand (the SET ). Thus, the Company s financial statements shall reflect the actual value of its investment. With the reference to the Company s management interviews together with its audited financial statements, the Company purpose to use proceeds from the disposition of the assets in TTW to repay debts, support its investments in construction projects in the future and strengthen its working capital structure. The Transaction shall benefit the Company to realize a profit on sale of investment in TTW shares for the period in Statements of Profit and Loss. The Company shall change the value of investment method from the equity method to the fair value due to the decrease in shareholding in TTW by 11.00% of CH. Karnchang Public Company Limited Page 6

10 registered and paid-up capital from 30.04% to 19.04%. As a result, the Company shall decrease net debt and increase shareholder s equity. 1.2 Transaction Period The Company, as a seller, will proceed with the Transaction after receiving an approval from the Shareholders Extraordinary General Meeting No. 1/2013 which will be held on February 5, 2013 and BECL, as a buyer, receives an approval from the Shareholders Extraordinary General Meeting of BECL No. 1/2013 which will be held on February 6, Involved parties and relationship with Listed Company Buyer Seller Securities Bangkok Expressway Public Company Limited ( BECL ) CH. Karnchang Public Company Limited ( CK ) The ordinary shares of Thai Tap Water Supply Public Company Limited ( TTW ), accounting for 11.00% of registered and paid-up capital Relationship The Company holds 116,669,550 shares in BECL, representing 15.15% of the registered and paid-up capital. Mr. Plew Trivisvavet holds the position of Chief Executive Officer of the Company and concurrently holds the position of Chairman of the Executive Board of BECL, whom the Company as a shareholder has delegated to oversee such juristic person. Mr. Plew Trivisvavet is not a controlling person in BECL. 1.4 Total value of the Transaction Total value of the Transaction regarding disposition of TTW shares is equal to THB 3,313,695,000, determining from 438,900,000 shares, or equaling to 11.00% of registered and paid-up capital, at THB 7.55 per share, whereby BECL (buyer) shall make payment by cashier s cheque or transfer cash via banking system on the Transaction date in the amount of THB 2,200,000,000. BECL shall make the remaining payment of THB 1,113,695,000 by April 2015, It shall make installments of 1) THB 200,000,000 by April 2013, 2) THB 200,000,000 by October 2013, 3) THB 200,000,000 by April 2014, 4) THB 200,000,000 by October 2014, and 5) the remaining installment by April Type and size of the Transaction With reference to the Notification of Resolution of Board of Directors Meeting of the Company No. 6/2012 on December 19, 2012, the Board of Directors of the Company passed a resolution to propose disposition transaction to the Company s shareholders meeting for considering an approval to sell 438,900,000 shares of TTW, representing 11.00% of registered and paid-up capital, at THB 7.55 per share. Total value of the Transaction shall be amounted to THB 3,313,695,000. This Transaction shall CH. Karnchang Public Company Limited Page 7

11 be deemed as a disposition of assets transaction as prescribed in the Notification of Acquisition or Disposal of Assets. The transaction size shall be calculated from the consolidated financial statements of the Company and TTW for the period ended September 30, 2012, reviewed by the certified public accountant (CPA). The details are as follows Basis of Calculation Size of Disposition Transaction (The Disposal of TTW Shares Transaction) 1 Calculation Basis Calculation Transaction Size 1. Net Tangible Assets 2 (NTA) Basis % decrease in TTW shareholding x NTA of TTW x 100 NTA of the Company 2. Net Profit Basis % decrease in TTW shareholding x Normalized net profit of TTW x Consideration Value Basis 4. Equity Share Value Basis Remark 1 2 Normalized net profit of the Company Total value of consideration paid x 100 Value of assets of the Company No. of shares issued for payment x 100 Total issued and paid-up shares of the Company 14.75% % 6.62% Not applicable because the Company does not issue shares for payment The information used in the calculation of the transaction size regarding the disposition of assets transaction is derived from the consolidated financial statements of the Company and TTW for the period ended September 30, 2012, reviewed by the certified public accountant (CPA) Net Tangible Assets (NTA) = Total assets Intangible assets Total liabilities Minority shareholders The transaction size is equal to %, obtained the maximum value from the calculation via net profit basis in accordance with the Notification of Acquisition or Disposal of Assets. Such transaction is classified as Type 1 Transaction. The Company is required to disclose details of the transaction to the SET and seek approval from shareholders meeting with affirmative votes of not less than three-fourths of the total number of votes of the shareholders attending the meeting and having the rights to vote, excluding the votes of the shareholders with conflict of interest, according to the Notification of Acquisition or Disposal of Assets. In addition, the disposition transactions which are taken place during 6-month period prior to the transaction are considered for calculation of the transaction size in accordance with the Notification of Acquisition or Disposal of Assets. With reference to the Notification of Resolution of the Board of Directors' Meeting No. 5/2012 on November 14, 2012, the Board of Directors passed a resolution to approve the Company to sell all 63,019,999 ordinary shares in Bangpa-in Cogeneration Limited ( BIC ) to CK Power Limited ( CKP ), representing 46.00% of the registered capital, at THB per share and sell all 875,250 ordinary shares in Changrai Solar Company Limited ( CRS ) to CKP, representing 30.00% of the registered capital, at THB per share. Total value of disposition of shares in BIC and CRS are amounted to THB 783,338,588 and THB 107,550,720, respectively. The transaction size can be calculated as follows CH. Karnchang Public Company Limited Page 8

12 Basis of Calculation Size of Disposition Transaction (Disposition Transactions which Taken Place During 6-month Period prior to the Disposal of TTW Shares Transaction) 1 Calculation Basis Calculation Transaction Size 1. Net Tangible Assets 2 (NTA) Basis % decrease in BIC/CRS shareholding x NTA of BIC/CRS x 100 NTA of the Company 2. Net Profit Basis % decrease in BIC/CRS shareholding x Normalized net profit of BIC/CRS x Consideration Value Basis 4. Equity Share Value Basis Remark 1 2 Normalized net profit of the Company Total value of consideration paid x 100 Value of assets of the Company No. of shares issued for payment x 100 Total issued and paid-up shares of the Company N/A N/A 6.13% Not applicable because the Company does not issue shares for payment The information used in the calculation of the transaction size regarding the disposition of assets transaction is derived from the consolidated financial statements of the Company for the period ended June 30, 2012, reviewed by the certified public accountant (CPA) and the internal financial statements of BIC and CRS for the period ended June 30, Net Tangible Assets (NTA) = Total assets Intangible assets Total liabilities Minority shareholders The transaction size shall include transaction on disposition of shares in BIC and CRS. Transaction size under the consideration value basis for transaction on BIC and CRS shares disposition is equal to 5.37% and 0.76% of total assets of the Company and its subsidiaries, respectively. When a 6-month accumulated transaction size is taken into consideration, the transaction size under the value for consideration shall be amounted to 12.75% of total assets of the Company and its subsidiaries, given that the Company will sell TTW shares at THB 7.55 each. However, calculation of transaction size by net tangible assets (NTA) basis and net profit basis could not be calculated, because of the restriction of financial data. CH. Karnchang Public Company Limited Page 9

13 Current Shareholding Structure of the Company and Related Companies Mitsui Water Holdings (Thailand) Company Limited 25.98% 9.24% Others 34.74% TTW 30.04% 15.15% CK BECL BLDC 68.50% 98.00% 30.00% 38.00% 30.00% 2.00% TWO 31.50% PTW CKP RATCH Others 2.00% 33.33% 10.67% PWA 46.00% 30.00% 30.00% % 56.00% BIC CRS NRS BKC SEAN EDL 2.00% Others 25.00% PTT 8.00% IEAT 70.00% Sonnedix Thailand I Limited 70.00% Sonnedix Thailand II Limited 75.00% 25.00% NN % Shareholding Structure of the Company and Related Companies after Entering into the Transaction Mitsui Water Holdings (Thailand) Company Limited 25.98% 20.24% Others 34.74% 19.04% TTW 15.15% CK BECL BLDC 68.50% 98.00% 30.00% 38.00% 30.00% 2.00% TWO 31.50% PTW CKP RATCH Others 2.00% 33.33% 10.67% PWA 46.00% 30.00% 30.00% % 56.00% BIC CRS NRS BKC SEAN EDL 2.00% Others 25.00% PTT 8.00% IEAT 70.00% Sonnedix Thailand I Limited 70.00% Sonnedix Thailand II Limited 75.00% 25.00% NN % CH. Karnchang Public Company Limited Page 10

14 Section 2 Details of Disposed Assets Details of disposed Assets The Company intends to dispose 438,900,000 shares of TTW, equaling to 11.00% of TTW registered and paid-up capital, at THB 7.55 per share. Total value of this transaction is THB 3,313,695, Thai Tap Water Supply Public Company Limited Company Overview and Nature of the Business Thai Tap Water Supply Public Company Limited ( TTW ) was established on September 11, 2000 with paid-up capital of THB 100,000, engaging in business of production and distribution of tap water to the Provincial Waterworks Authority ( PWA ) in the Samutsakorn Province including Krathumban District and Meuang District and the Nakhon Pathom Province including Sampran District, Nakhon Chaisri District. In the production process, fresh water from the Ta Chin River is used as the raw material. Tap water from Bang Len Water Treatment Plant is distributed via bulk transmission main ( BTM ) to Phutthamonthon Pumping Station and Mahachai Pumping Station. Tap water is then distributed via local distribution network ( LDN ) in Sampran office, Om Noi office and Samutsakorn office to consumers. TTW s first operation date is January 5, TTW has changed its status to a public company limited on July 6, 2006 and has been listed on the SET on May 30, 2008, classifying in resources industry energy & utilities sector. As of September 30, 2012, TTW s registered and paid-up capital is THB 3,990,000,000, dividing into the amount of 3,990,000,000 shares, with a par value of THB 1 each. TTW operates business under the Concession to operate treated water granted by the Ministry of Natural Resources and Environment for a period of 25 years, commencing on March 11, Moreover, TTW has signed Water Purchase Agreement with the PWA dated September 21, 2000, which covers a period of 30 years from July 21, 2004 to July 20, TTW shall operate on Build-Own Operate ( BOO ) basis. As per the Agreement, TTW obligates to distribute tap water to the PWA at least at minimum off-take quantity ( MOQ ) as describe as follows Period Minimum Off-take Quantity (m 3 /day) From July 21, 2004 to July 20, , From July 21, 2006 to July 20, , From July 21, 2008 to July 20, , In addition, TTW sign an amendment agreement dated December 29, Under the amendment agreement, the PWA will increase its minimum off-take quantity ( MOQ ) as describe as follows. Period Within 660 days after the amendment agreement is signed or no later than October 19, 2010 to October 18, 2011 Additional Portion of Minimum Off-take Quantity (m 3 /day) 9, October 19, 2011 to October 18, , CH. Karnchang Public Company Limited Page 11

15 Period Additional Portion of Minimum Off-take Quantity (m 3 /day) October 19, 2012 to October 18, , October 19, 2013 to October 18, , October 19, 2014 to October 18, , October 19, 2015 to July 20, , In 2007, in order to reduce the conflict from operating the same type of business, TTW acquired 11,759,735 shares, accounting for 98.00% of registered and paid-up capital in Pathum Thani Water Company Limited ( PTW ) from its major shareholders who are also TTW s major shareholders. As a result, PTW was TTW s subsidiary thereafter. In 2009, TTW bought the rights to production, distribution and service in Bangpa-In Industrial Estate for a period of 30 years, from August 7, 2009 to August 8, Total value of the transaction was THB 1,400 million. In 2010, Thai Water Operations Company Limited ( TWO ) was established from merging between WaterFlow Company Limited, the subsidiary of TTW, and BJT Water Company Limited, the subsidiary of PTW. Currently, TTW holds 68.50% of registered and paid-up capital. Shareholding structure of TTW Thai Tap Water Supply Public Company Limited Registered capital THB 3, million Paid-up capital THB 3, million 98.00%* Pathum Thani Water Company Limited Registered capital THB 1, million Paid-up capital THB 1, million 68.50% 30.00% CK Power Limited Registered capital THB 9, million Paid-up capital THB 9, million Remark *2.00% of registered and paid-up capital holds by the PWA Details of TTW, entities that TTW holds shares more than 10.00% as well as their core business operations are presented as follows Name of Companies 31.50% Thai Water Operations Company Limited Registered capital THB million Paid-up capital THB million Registered Capital (THB million) % of Shareholding of TTW Nature of the Business CH. Karnchang Public Company Limited Page 12

16 Name of Companies Pathum Thani Water Company Limited Thai Water Operations Company Limited Registered Capital % of Shareholding Nature of the Business (THB million) of TTW 1, Production and sale of tap water to PWA Management of maintenance and testing the quality of tap water in accordance with the standards of production and distribution of tap water to PWA CK Power Limited 9, Holding company, mainly investing in power business In 2010, TTW has expanded the production capacity from 320,000 m 3 per day to 440,000 m 3 per day. As of September 30, 2012, TTW s minimum off-take quantity of tap water in accordance with the Water Purchase Agreement and its amendment agreement with PWA is 318,000 m 3 per day. In September 2011, TTW purchased 1,100,000 shares of CK Power Limited ( CKP ) from the Company, 1,200,000 shares from BECL, and 699,999 shares from Bangpa-In Land Development Company Limited. Therefore, TTW holds 30.00% of registered capitals in CKP, equaling to 3,000,000 shares. However, later in November, CKP increased its registered capital from THB 100,000,000 to THB 9,200,000,000. As for maintaining the shareholding in CKP at 30.00%, TTW acquired increased capital, accounting for 273,000,000 shares. Hence, TTW currently holds 276,000,000 shares in CKP. CKP operates as a holding company with the objective to restructure the investment portfolios in energy sector. Summary of agreements and concessions of TTW are as follows Thai Tap Water Supply Public Company Limited 1. Contract Party Contract Date Contract Duration Contract Type Terms of Contract 2. Contract Party Contract Date Terms of Contract 3. Concession Concession provider Concession Period Summary of Details of Agreement and Concession Tap Water Purchase Contract Provincial Waterworks Authority ( PWA ) September 21, years (21 July July 2034) Build-Own-Operate ( BOO ) PWA will purchase tap water produced by the Company to distribute to consumers. The servicing area covers the whole Samutsakorn Province (including Krathumban District and Meuang District) and the area in Sampran District, Nakhon Chaisri District, Nakhon Pathom Province. Amendment in Tap water Purchase Contract Provincial Waterworks Authority ( PWA ) December 29, 2008 The Company s total minimum of quantity purchased by PWA increases from 300,000 m 3 per day to 354,000 m 3 per day. Tap Water Operating Concession Ministry of Natural Resources and Environment 25 years (March 11, 2005 March 10, 2030) CH. Karnchang Public Company Limited Page 13

17 Rights under Concession 4. Contract Party Contract Date Terms of Contract 5. Contract Party Contract Date Contract Duration Terms of Contract 6. Contract Party Contract Date Contract Duration Terms of Contract Summary of Details of Agreement and Concession To operate and distribute tap water in 5 districts, 2 provinces including 1. Nakhon Pathom Province Sampran District, Nakhon Chaisri District, and Buddhamonthon District 2. Samutsakorn Province Krathumban District and Meuang District Permission in Using Water from the Tha Chin River National Water Resources Board April 24, 2001 To pump water from the Tha Chin river (former name, Nakhon Chai Si river) to produce tap water of 320,000 m 3 per day and distribute to consumers in Nakhon Pathom Province and Samutsakorn Province Management and Maintenance Contract Thai Water Operations Company Limited January 26, 2007 Since the date of agreement to 2023 The party serves the maintenance unit. Operation rights to Manage Water and Wastewater Bangpa-in Land Development Company Limited August 7, years (from first operation date to August 8, 2039) BIE transfers the exclusivity right to produce and sell tap water and wastewater treatment. The subsidiaries and the associated companies of TTW As of September 30, 2012, shareholding structure of TTW in its subsidiaries and the associated companies are presented as follows TTW 68.50% 98.00% 30.00% TWO 31.50% PTW CKP 46.00% 30.00% 30.00% % 56.00% BIC CRS NRS BKC SEAN 75.00% Remark with reference to the Notification of Resolution of Board of Directors Meeting of the Company No. 5/2012 on November 14, 2012, the Board of Directors passed the resolution to sell all shares in BIC and CRS to CKP, representing 46.00% and 30.00% of registered capital, respectively. CH. Karnchang Public Company Limited Page 14 NN2

18 Details of TTW s subsidiaries Pathum Thani Water Company Limited - Company Overview and Nature of the Business Pathum Thani Water Company Limited ( PTW ) was established on May 29, 1995 namely PCKT (Thailand) Company Limited, engaging in tap water production and distribution to PWA. The registered capital is THB 200,000,000 with par of THB 100 each. It was jointly founded with shareholding of the Company, Berli Jucker Public Company Limited, Capital Rice Company Limited, Bovis Limited and PWA at 30.00%, 30.00%, 15.00%, 15.00%, 5.00% and 5.00%, respectively. In 2007, TTW acquired 10,698,283 and 1,061,452 shares of PTW in June and December, respectively. As a result, TTW become a 98.00% shareholder in its subsidiary, PTW. As of September 30, 2012, PTW s registered and paid-up capital is THB 1,200,000,000, dividing into the amount of 12,000,000 shares, with a par value of THB 100 each. PTW engages in business of production and distribution of tap water to the PWA in Pathumthani - Rangsit areas. PTW has signed Water Purchase Agreement with the PWA dated August 31, 1995, which covers a period of 25 years from October 15, 1998 to October 16, PTW operates business under the Concession to operate treated water granted by the Ministry of Interior for a period of 25 years, commencing on January 13, In the production process, fresh water from the Chao Phraya River is used as the raw material. Tap water from Water Treatment Plant in Sam Khok is distributed via bulk transmission main ( BTM ) to Rangsit Pumping Station, Thammasat Pumping Station and Pathumthani Pumping Station. Tap water is then distributed via local distribution network ( LDN ) in Pathumthani office and Rangsit office to consumers. Thank to the growth in demand of tap water in serviced area, PTW has signed Water Purchase Agreement with the PWA dated September 15, 2006 which covers a period until October 16, According to the Water Purchase Agreement, PWA agreed to purchase treated water at the minimum off-take quantity of 70,000 m 3 per day in Rangsit area. As of September 30, 2012, PTW has maximum capacity of 388,000 m 3 per day. PWA has purchased treated water from PTW at the minimum off-take quantity of 330,000 m 3 per day since August Summary of agreements and concessions of PTW are as follows Name of Companies Pathum Thani Water Company LImited 1. Contract Party Contract Date Contract Duration Contract Type Terms of Contract Summary of Details of agreement and concession Production and Distribution of Tap Water Contract Provincial Waterworks Authority ( PWA ) August 31, years (October 15, 1998 October 14, 2023) Build-Own-Operate-Transfer ( BOOT ) To distribute tap water not exceeding 288,000 m3 CH. Karnchang Public Company Limited Page 15

19 Name of Companies 2. Contract Party Contract Date Contract Duration Contract Type Terms of Contract 3. Concession Concession provider Concession Period Rights under Concession 4. Contract Party Contract Date Terms of Contract 5. Contract Party Contract Date Contract Duration Contract Type - Board of Directors and Shareholding Structure Summary of Details of agreement and concession As of December 20, 2012, PTW s Board of Directors is as follows Sale and Purchase of Tap Water Contract Provincial Waterworks Authority ( PWA ) September 15, 2005 Since the date of agreement to October 14, 2023 Build-Own-Operate-Transfer ( BOOT ) Additional purchase of tap water at 70,000 m 3 per day Tap Water Operating Concession Ministry of Interior 25 years (January 13, 2000 January 12, 2025) To operate and distribute tap water Pathumthani Rangsit District, Pathumthani Province Permission in Using Water from the Chao Phraya River National Water Resources Board January 24, 1996 To pump water from the Chao Phraya river at 300,000 m 3 per day Management and Maintenance Contract Thai Water Operations Company Limited January 26, 2007 Since the date of agreement to 2023 The party serves the maintenance unit. No. Name Position 1 Mr. Sompodh Sripoom Chairman of the Boards of Directors 2 Mr. Somkiat Pattamamongkolchai Director 3 Ms. Oraphin Assawanik Director 4 Mr. Techapit Sangsingkeo Director 5 Mr. Phairuch Mekarporn Director 6 Mr. Hidekuni Nakayama Director Source BOL PTW s shareholders as of March 6, 2012 are as follows No. Name No. of Shares % 1 Thai Tap Water Supply Public Company 11,759, Limited 2 Provincial Waterworks Authority 240, Total 11,999, Source BOL CH. Karnchang Public Company Limited Page 16

20 Thai Water Operations Company Limited - Company Overview and Nature of the Business Thai Water Operations Company Limited ( TWO ) was established from merging between WaterFlow Company Limited, the subsidiary of TTW, and BJT Water Company Limited, the subsidiary of PTW in January 8, TWO engages in management and maintenance of production and supply of treated water system and management of waste water system to TTW, PTW and Bangpa-in Industrial Estate. Moreover, TWO also provides a service to Amata City Industrial Estate, Rayong and Amata Nakhon Industrial Estate, Chonburi. As of September 30, 2012, TWO s registered and paid-up capital is THB 60,000,000, dividing into the amount of 600,000 shares, with a par value of THB 100 each. - Board of Directors and Shareholding Structure As of December 20, 2012, TWO s Board of Directors is as follows No. Name Position 1 Mr. Ratn Santaannop Director 2 Mr. Sompodh Sripoom Director 3 Mr. Tanat Siricharoen Director 4 Mr. Somkiat Pattamamongkolchai Director Source BOL TWO s shareholders as of March 8, 2012 are as follows No. Name No. of Shares % 1 Thai Tap Water Supply Public Company 411, % Limited 2 Pathum Thani Water Company Limited 188, % Total 599, % Source BOL Details of TTW s Related Companies CK Power Limited - Company Overview and Nature of the Business CK Power Limited ( CKP ) was established on June 8, 2011, to operate as a holding company with the objective to restructure the investment portfolios in energy sector. As of September 30, 2012, CKP s shareholding in SEAN is 56.00%. CKP was established on June 8, 2011 to operate as a holding company with the objective to restructure the energy business under CH. Karnchang Public Company Limited ( CK ) to be under one holding company in order to support the future expansion. As of September 30, 2012, CKP invests 56% of SEAN shares. CH. Karnchang Public Company Limited Page 17

21 Pursuant to the Annual General Shareholder Meeting of CKP which was held on November 1, 2011, the shareholders have approved CKP to increase the capital from THB 100,000,000 to THB 9,200,000,000 by issuing 910,000,000 more common shares at the par value of THB 10 each. The objective is to settle the loan payment and arrears with the Company and to support the purchase of SEAN s common shares from other shareholders at the price of THB 25 each. With regards to Notification of Resolution of the Board of Directors of the Company on June 12, 2012, the Board of Directors passed an approval to sell all common shares in Bangkhenchai Company Limited ( BKC ) and Nakhon Ratchasima Solar Company Limited ( NRS ) to CKP. Later on September 12, 2012, the Board of Directors of the Company passed an approval to sell all common shares in Bangpa-in Cogeneration Limited ( BIC ) and Changrai Solar Company Limited ( CRS ) to CKP. As of September 30, 2012, CKP s registered and paid-up capital is THB 9,200,000,000, dividing into the amount of 920,000,000 shares, with a par value of THB 10 each. Details of CKP, entities that CKP holds shares more than 10.00% as well as their core business operations are presented as follows Name of Companies Registered Capital (THB million) % of Shareholding of CKP Nature of the Business CK Power Limited 9, Holding Company, mainly investing in power business SouthEast Asia Energy Limited 6, * A business of construction, design, control, advice provision, operation, installation, repair, maintenance, inspection, test, analysis and research Bangkhenchai Company Limited Nakhon Ratchasima Solar Company Limited Changrai Solar Company Limited on all types of power plants ** A business of construction and operation of the project for electricity generation by solar energy, with a production capacity of 8 MW, to generate and distribute electricity to PEA. BKC has started to the operation since August 10, ** A business of construction and operation of the project for electricity generation by solar energy, with a production capacity of 6 MW, to generate and distribute electricity to PEA. NRS has started to the operation since March 8, *** A business of construction and operation of the project for electricity generation by solar energy, with a production capacity of 8 MW, to generate and distribute electricity to PEA. CRS has started to the operation since December CH. Karnchang Public Company Limited Page 18

22 Name of Companies Bangpa-in Cogeneration Limited Remark * Registered Capital (THB million) % of Shareholding of CKP Nature of the Business 1, *** A business of operation of the Small Power Producers (SPP) construction and management, with the production capacity of 120 MW, by the cogeneration system within Bangpa-in Industrial Estate to generate and distribute electricity to EGAT and industrial operators in Bangpa-in Industrial Estate. BIC is expected to start the operation in June CKP acquired more share of SEAN in August 2012 and become a 56.00% shareholder ** With the reference to the Notification of Resolution of the Board of Directors of the Company No. 2/2012 on June 12, 2012, the Board of Directors passed the approval to sell all common shares in BKC, representing to % of the registered company and sell all common shares in NRS, representing 30.00% of the registered capital to CKP *** With the reference to the Notification of Resolution of the Board of Directors of the Company No. 5/2012 on September 14, 2012, the Board of Directors passed the approval to sell all common shares in BIC, representing to 46.00% of the registered company and sell all common shares in CRS, representing 30.00% of the registered capital to CKP - Board of Directors and Shareholding Structure As of December 20, 2012, CKP s Board of Directors is as follows No. Name Position 1 Mr. Plew Trivisvavet Director 2 Mr. Supong Chayutsahakij Director 3 Mr. Narong Sangsuriya Director 4 Mr. Prasert Marittanaporn Director 5 Mr. Sompodh Sripoom Director 6 Mr. Somkiat Pattamamongkolchai Director 7 Mr.Thanawat Trivisvavet Director 8 Mr. Thanong Bidaya Director 9 Mr. Techapit Sangsingkeo Director 10 Mr. Vicharn Aramvareekul Director 11 Mr. Kamphui Jeerararuensak Director 12 Ms. Supamas Trivisvavet Director Source BOL CKP s shareholders as of May 10, 2012 are as follows No. Name No. of Shares % 1 CH. Karnchang Public Company Limited 349,600, Thai Tap Water Supple Public Company Limited 276,000, Bangkok Expressway Public Company Limited 276,000, Bangpa-in Land Development Company Limited 18,400, Total 920,000, Source BOL CH. Karnchang Public Company Limited Page 19