SET Announcements

(Translation) No. CK-06-0000-PO-L-0438 December 27, 2006 Re: Additional Clarification on Restructuring of Pathum Thani Water Co., Ltd. Attn.: President of the Stock Exchange of Thailand Reference is made to the fact that CH. Karnchang Public Company Limited ("CK") informed the Stock Exchange of Thailand of resolutions of the Board of Directors Meeting No. 6/2006 on December 25, 2006. CK hereby submits additional clarification in support of consideration of investors, as follows: 1. Details of capital increase of Pathum Thani Water Co., Ltd. ("PTW") 1.1 Former registered capital Baht 1,102 Million (11,020,000 shares) at the par value of Baht 100 per share; Increased capital Baht 1,650 Million (16,500,000 shares) at the par value of Baht 100 per share; New registered capital Baht 2,752 Million (27,520,000 shares) at the par value of Baht 100 per share. 1.2 PTW shall allocate new shares to the existing shareholders according to their shareholding ratio at the par value of Baht 100 per share and schedule the period for subscription of and payment for such capital increase shares to be made by January 19, 2007. In case there are shares remaining from such allocation, the remaining shares shall be further allocated to the remaining shareholders according to their ratio. 2. O&M Agreement executed between PTW and OPCO 2.1 Details of the O&M Agreement Essence of the Agreement: PTW engaged OPCO to manage and maintain the Pathumthani-Rangsit Water Supply Project under the Concession Agreement of the Provincial Waterworks Authority. That is, OPCO shall manage the production of tap water in accordance with the specified volume so that PTW would be able to distribute such tap water to the Provincial Waterworks Authority. The minimum availability on the commencement date shall be the minimum purchased volume of 140,000 cubic meters plus the reserved volume at the rate of 30 percent of the minimum purchased volume but in aggregate not exceeding 288,000 cubic meters, which is the maximum production volume of PTW. Furthermore, OPCO shall maintain buildings, machinery, equipment and property in the Pathumthani-Rangsit Water Supply Project throughout the term of the Agreement. Term of the Agreement: 25 years from the date on which PTW issues a letter informing OPCO to commence the operation (December 1, 1998 - December 1, 2023). Conditions on compensation for early termination of the Agreement: OPCO may terminate the Agreement if PTW could not resolve any circumstances within the specified period in case that PTW could not pay the service fees to OPCO or is in breach of the Agreement in material clause. In this regard, PTW shall compensate OPCO for damage in the amount equivalent to the service fees due for payment plus costs, damages and expenses incurred by PTW plus expenses in demobilization of workforce. 2.2 Payment for early termination of the Agreement In respect of payment for early termination of the said agreement to OPCO in the amount of Baht 390 Million, CK appointed Far East Securities Company Limited as financial advisor to evaluate the compensation fee on December 21, 2006 by using the net present value method of cash flow with significant assumptions as follows: a. Period of forecast: calculated from the net present value of cash flow in the years 2006 - 2023 b. Main revenue: according to the O&M Agreement, whereby the calculation method, service fee rates would be set out based on inflation rate. The average production rates from 2006 to the end of concession, namely, year 2023, would be as follows: Year 2006: at the average of 0.293 million cubic meters per day (average production volume from January 1, 2006 to December 31, 2006); Year 2007: at the average of 0.330 million cubic meters per day; Year 2008: at the average of 0.345 million cubic meters per day; Years 2009 - 2023: at the average of 0.358 million cubic meters per day. c. Cost of sale 1) Average costs of chemicals and energy: From January 1, 2006 - September 30, 2006, the costs of chemicals and energy increased according to the inflation rate. During 2007 - 2023, the forecast of inflation rate would be fixed at 3 percent. 2) Administrative expenses: In the year 2006, the administrative expenses were approximately Baht 5 Million and would constantly increase every year at the rate of 6 percent. 3) Investment expenses: In the year 2006, the forecast of additional investments in machinery and equipment was in the amount of Baht 0.5 Million and would constantly increase every year in the amount of Baht 0.2 Million per year. 4) Expenses for management fee: In the year 2006, such expenses were approximately Baht 85 Million. The service fee would increase according to the inflation rate. During 2007 - 2023, the forecast of inflation rate would be fixed at 3 percent. The financial advisor provided an opinion that OPCO should receive the reasonable compensation in the amount of approximately Baht 528.19- 564.19 Million should PTW terminate the Agreement. 3. PTW's purchase of shares from the existing shareholders of BJT at the price of Baht 600 per share 3.1 Reason for PTW not directly enter into the O&M Agreement with BJT With respect to the adjustment of structure for management and production of tap water during the beginning of business operation, Thames Water Group, as major joint investor having experience and expertise, and being a leader in the business of management and adjustment of structure for the entire management and production of tap water, had PTW enter into the O&M Agreement with OPCO, and OPCO would be required to subcontract BJT for such operations. The purchase of all shares in BJT would enhance the efficiency in the cost management of PTW and cause the management structure of PTW to be adjusted which would be beneficial to the company in case of further listing on the Stock Exchange of Thailand. 3.2 Significant assumptions a. Period of forecast: calculated from the net present value of cash flow in the years 2006 - 2023. b. Main revenue: according to the O&M Agreement, whereby the calculation method, as well as service fee rates would be set out based on inflation rate. The average production rates from 2006 to the end of concession, namely, year 2023, would be as follows: Year 2006: at the average of 0.293 million cubic meters per day (average production volume from January 1, 2006 to December 31, 2006); Year 2007: at the average of 0.330 million cubic meters per day; Year 2008: at the average of 0.345 million cubic meters per day; Years 2009 - 2023: at the average of 0.358 million cubic meters per day. c. Costs of service 1) Costs of service, comprising salary, security fee and other expenses, would increase at the rate of 6 percent per year, and the service fee for disposal of sludge and sediment, as well as the service fee for water quality testing would increase according to the inflation rate, whereby the forecast of inflation rate would be fixed at 3 percent. 2) Administrative expenses: In the year 2006, the administrative expenses were approximately Baht 4 Million and the forecast would constantly increase at the rate of 6 percent. Other expenses in the year 2006 were approximately Baht 9 Million and the forecast would constantly increase at the rate of 4.5 percent. 3) Investment expenses: In the year 2006, the forecast of additional investments in machinery and equipment was in the amount of Baht 3 Million and would be fixed throughout the forecast period. 4) Turnover of current assets and current liabilities - Trade accounts receivable - OPCO at the average of approximately 45 days; - Other trade accounts receivable at the average of approximately 30 days; - Trade accounts receivable- CK Project at the average of approximately 60 days; - Other trade accounts payable at the average of approximately 30 days. The financial advisor provided an opinion that the reasonable value of BJT as calculated based on CAPM theory equals Baht 409.38 Million or Baht 818.76 per share (valuated as at December 21, 2006). 3.3 Significant financial information of BJT (Unit: Million Baht) Description Audited Unaudited December31,2004 December 31,2005 September 31,2006 Current assets 114.20 65.80 43.00 Non-current assets 7.03 9.78 75.54 Total assets 121.23 75.58 118.54 Total liabilities 40.73 11.57 8.85 Registered capital 50.00 50.00 50.00 Issued and paid-up capital 50.00 50.00 50.00 Shareholders' equity 80.50 64.01 109.69 Total liabilities and shareholders' equity 121.23 75.58 118.54 Total revenue 152.35 96.96 92.27 Total expenses 115.14 63.65 46.59 Net earnings1/ 24.86 24.02 45.68 Net earnings per share (Baht)49.72 48.03 91.35 Par value per share (Baht) 160.99 128.03 219.38 Note: 1/ Net earnings ended September 30, 2006 are the earnings before corporate income tax. Please be informed accordingly. Very truly yours, - Signature - (Mr. Anukool Tuntimas) Executive Vice President Human Resource and General Administration ?? ?? ?? ?? 4