SET Announcements

(Translation) No. CK-06-0000-PO-L-0031 January 26, 2006 Re: Additional Clarification on Purchase of Ordinary Shares in Water Flow Co., Ltd. Attn.: The President of the Stock Exchange of Thailand Reference is made to the fact that CH. Karnchang Public Company Limited informed the Stock Exchange of Thailand to clarify the purchase of ordinary shares in Water Flow Co., Ltd. The Company hereby additionally clarifies the details as follows: 1. The evaluation of share value of Water Flow Co., Ltd. 1.1 Financial Advisor: Far East Capital Advisory Co.,Ltd. Share Value Approach As of 30 November 2005 Equity Value Equity Value per Share (Baht Million) (Baht) 1. Book Value 111.81 1,118.14 2. Adjusted Book Value 111.81 1,118.14 3. Price to Earning Ratio 301.75-323.32 3,017.45-3,223.21 4. Price to Book Value Ratio 103.76-113.60 1,037.60-1,135.99 5. Discounted Cash Flow 763.35-934.20 7,633.53-9,342.01 1.2 Financial Advisor: KPMG Phoomchai Business Advisory Ltd. Share Value Approach As of 31 December 2005 Equity Value Equity Value per Share (Baht Million) (Baht) 1. Discounted Cash Flow 795-827 7,945-8,271 2. Dividend Discounted Model 768-800 7,683-8,003 The Financial Advisor used the Discounted Cash Flow and Dividend Discounted Model to compute the equity value range. The valuation methods and the computed value of the Company are the methods to reflect the potential growth of operation and business. The assumptions are as followed. The following assumptions and forecast criteria are used in this financial statement. - The financial projection includes a 29 - year period according to Operating and Maintenance Agreement ("OMA") between WF and TTW. - The financial forecast is based on their views of future operation, Operating and Maintenance Agreement, cost of production, and addition plan in the future. - WF's internal financial statement. The Forecast Criteria of Earnings Statement 2006 F 2007 F 2008 F 2009 F 2010 F 2034F Volume Water Production (cu.m./day) 256,000 305,000 320,000 320,000 320,000 320,000 Inflation Growth CPI Factor 5.70% 4.25% 4.00% 3.40% 3.00% 3.00% Revenue Service Rate (Growth by CPI) 3.56 3.71 3.86 3.99 4.11 8.35 Interest Income 1% 1% 1% 1% 1% 1% Water Production (cu. m./day) Based on the Operating and Maintenance Agreement with TTW, derived from the average of the estimated volume based on the increasing demand of treated water with 30 year concession. However, the company's management expected to increase the water volume according to such agreement and reach a full capacity. The utilization rate is expected to improve as corresponding to a sharp increase of treated water demand in the near future as the above table. According to the Operation and Maintenance Agreement between WF and TTW, WF is stipulated to grant a compensation to TTW for the cost saving as a result of WF not being able to supply shortfall quantities. The compensation is calculated by multiplying the amount by which the actual quantity of treated water purchased is less than the minimum off take quantity. However, the WF's management believes that the possibility to pay this amount is not likely to be occurred. In case that TTW purchases treated water less than MOQ, it shall compensate WF with an additional Bulk Water Charge of the different amount between actual volume and MOQ. However, WF's management believes that the possibility to pay this amount is not likely to be occurred. CPI Factor Source of the calculation on CPI factor of the central region that is from the actual figures in December 2005. As announced by the Ministry of Commerce at the rate of 5.7% which is taken on the service rate calculation in 2006. For the forecast criteria in 2007 that will use CPI factor of the whole country as forecasted by Institute of Research for Thailand Development at the rate of 4%, 3.4% and 3% respectively. Moreover, the forecast criteria will be stable at the rate of 3% from 2012 onwards. Service Rate/ Cu. M. The service rate is specified by calculation method that mentioned in the Operating Agreement with TTW, which is changed according to CPI factor as forecasted above. Interest Income The interest income calculated from 1% of the total balance in each installment. Cost of Production The production cost comprises of 1. Chemical cost 2. Electricity cost 2006 F 2007 F 2008 F 2009 F 2010 F 2034 F Cost of production Chemical cost 0.51 0.53 0.55 0.57 59 1.19 Electricity cost 1.70 1.77 1.85 1.91 1.97 3.99 Sales and administrative expense (Growth by CPI factor rate) 47.6 49.3 51.0 52.6 54.0 104.4 Depreciation expense 20% 20% 20% 20% Corporate Tax Rate Tax rate 30% 30% 30% 30% 30% 30% Balance Sheet Assumptions The chemical cost comprises the raw material used in water treatment production such as Aluminium Sulphate Liquid, Calcium Hydroxide, Magnafloc and Liquid Chloride, expected to grow by the growth of CPI factor as the above forecast. The cost of electricity is the major component cost of production which is expected to grow according to the growth of CPI factor as the above forecast. Expenses of Sales and Administration The expenses of sales and administrative consist of salary, depreciation expenses, communication expenses, security expenses, office supply, maintenance expenses and other expenses, are estimated to be fixed amounting of Baht 45 million and it is forecasted to be increased by the CPI growth as the above mentioned. Depreciation Expenses The depreciation expenses are calculated by the existing fixed assets which is assumed to be 5 years. Corporate Tax Rate Corporate tax rate is calculated 30%. Projected Balance Sheet Account receivable Account receivable is projected from collection days turnover based on historical data which is set at 30 days throughout the projection period. Inventory WF's inventory days turnover is projected to be 7 days throughout the projection period based on the historical data. Other current assets Based on the historical figures, other current assets, which mainly consist of purchase tax undues, are assumed to be the average of 6% on total cost of sales throughout the projection period. Accounts payable Account payable is projected from account payable days turnover based on Wf's historical data which is 30 days over the projected period. Accrued Corporate Income Tax Based on the historical data, the projected accrued corporate income tax are assumed to be 40% on corporate income tax. Selling Tax Undue Based on the historical data, the projected selling tax undue are assumed to be 2% on sales. Other Current Liabilities Based on the historical figures, other current liabilities are assumed to be on the average of 1% on total revenue throughout the projection period. Property, plants, and equipment (PP&E) There is no additional capital expenditure assumed over the projection period. Share capital It is assumed that there are no significant changes in the capital structure in the future. FSum of Income Statement Assumptions Please be informed accordingly. Very truly yours, - Signature - (Mr. Anukool Tuntimas) Executive Vice President Human Resource and General Administration 5