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(Translation) No. CK-06-0000-PO-L-0371 October 3, 2006 Re: Additional Clarification on Purchase of Ordinary Shares in 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") previously notified the Stock Exchange of Thailand of the resolutions passed by the Board of Directors' Meeting No. 5/2006 held on September 25, 2006. The Company hereby additionally clarifies the purchase of ordinary shares in Pathum Thani Water Co., Ltd., as per the inquiries raised by the Stock Exchange of Thailand in support of investors to make their decision to invest, whereby such additional clarification shall be required to be submitted through the electronic system, as follows: 1. Given the fact that the size of the transaction in which the CK Board of Directors considered purchasing ordinary shares from Mahasiri Siam Co., Ltd., representing 2.98 percent, which was nearly 3 percent which would require approval from the Shareholder's Meeting, and that the CK Board of Directors considered it as an investment in a project which should derive worthwhile return on a long-term basis with fairness in terms of price and relevant conditions, why did the CK Board of Directors consider purchasing merely 659,000 ordinary shares in Pathum Thani Water Co., Ltd. from Mahasiri Siam Co., Ltd., as major shareholder of CK, out of the total of 3,746,072 shares held by Mahasiri Siam Co., Ltd.? The CK Board of Directors considered purchasing merely 659,000 ordinary shares in Pathum Thani Water Co., Ltd. from Mahasiri Siam Co., Ltd., as major shareholder of CK, out of the total of 3,746,072 held by Mahasiri Siam Co., Ltd. as Mahasiri Siam Co., Ltd. had given a letter expressing an intention to offer for sale merely 659,000 shares in Pathum Thani Water Co., Ltd., including the sale of the right to receive repayment in proportion to the number of shares so offered, namely, the obligation under the Sponsors Support Agreement, covering principal and interest, for which the CK Board of Directors considered it an investment in a project which should derive worthwhile return on a long-term basis with fair price. 2. CK previously notified that the share purchase price of Baht 73.50 per share, which was considered fair by the Board of Directors, while the book value per share in Pathum Thani Water Co., Ltd. as per the unaudited internal financial statements as at June 30, 2006 was Baht (53.45) per share, therefore, what was the basis used in support of the consideration, e.g., valuation method, assumption and whether there was any independent valuator, and if so, please specify the name of the independent valuator and the valuation date? The agreed purchase price was Baht 73.50 per share, which was the same price as CK purchased from another existing shareholder (Berli Jucker Public Company Limited) which had no connection with the Company and the price would be Baht 233.63 per share upon including the obligation. Furthermore, Advisory Plus Co., Ltd., as independent financial advisor, had calculated the net present value of cash flow estimated to derive by using the discounted cash flow which the price is higher than the agreed purchase price, based on the valuation of PTW value per share as of September 19, 2006, as the significant premises are followed. Water Production Water production in 2006 has been equal to 280,000 cubic meter per day and from 2007-2023 will be equal to 288,000 cubic meter per day.Inflation RateDue to be equal to the percentage of 3.00 from 2006 up to be scheduled in concession time in 2023. Rf = 5.36%, return rate of the government bond in 17 years as of September 11, 2006. Rm = 12.04%, return rate of the investment in the Stock Exchange averaged 15 years backwards. ? = 0.57, variable value between return rate of the Stock Exchange and share value of EASTW as compared with its business. t = 30%, income tax of the law juristic entity that the business will be going to have its tax from 2012 onwards. D/E Ratio = 2.38 per 1 (The proportion of long-term loan (financial institute + shareholder) and the paid fund between 2006-2016) Kd (1-t) = 8.125% in 2006-2011 = 5.688% from 2012-2016 3. CK was requested to conclude the chronological order of events in relation to the investment in Pathum Thani Water Co., Ltd. since the beginning of the investment to date, specifying the date of commencement of investment, the number of shares, price, method of acquisition, sellers, including the total obligation under the Sponsors Support Agreement to be assumed on each occasion of investment, separated into loan and accrued interest: In this regard, CK hereby concludes the chronological order of events regarding investment in Pathum Thani Water Co., Ltd. ("PTW") as follows: - Pathum Thani was incorporated on May 29, 1995 with the registered capital of Baht 100,000, divided into 1,000 ordinary shares, at the par value of Baht 100 per share. - On July 24, 1995, CK has invested 300 shares in PTW by purchasing such shares from the existing shareholders with no connection at the price of Baht 100 per share, representing 30 percent of the registered capital. - On August 2, 1995, PTW increased its capital from originally Baht 100,000 to Baht 200,000,000, of which CK proportionately invested in 599,700 shares at the price of Baht 100 per share, totaling 600,000 shares, representing 30 percent of the registered capital. - On December 25, 1995, PTW increased its capital from originally Baht 200,000,000 to Baht 1,102,000,000, of which CK proportionately invested in 2,706,000 shares at the price of Baht 100 per share, totaling 3,306,000 shares, representing 30 percent of the registered capital. - On September 25, 1997, CK sold 165,300 shares in PTW to Krung Thai Bank Public Company Limited, as 30,000 shares (Baht 100 paid-up stock) were at the total price of Baht 3,090,000 and 135,300 shares (paid shares = Baht 27.7161) were at the total price of Baht 3,856,050 (book value = Baht 27.7161 per share), thereby remaining 3,140,700 shares representing 28.50 percent of the registered capital as that time there did not have any obligations according to the arisen SPA. - On March 9, 1998, CK sold 1,487,700 shares in PTW to CH. Karnchang Holding Co., Ltd., at the price of Baht 78.83 per share (book value = Baht 68.7361 per share), totaling Baht 117,275,391, including the transferred obligation for the capital of Baht 35,227,220 and interest of Baht 262,288.46, totaling Baht 35,489,508.46 (according to Sponsors Support Agreement at that time) and the price would be Baht 102.69 per share upon including the obligation, thereby remaining 1,653,000 shares representing 15.00 percent of the registered capital. - On November 5, 1999, CK purchased 1,553,820 shares in PTW from CH. Karnchang Holding Co., Ltd. at the price of Baht 123.31 per share (book value = Baht (1.04) per share), totaling Baht 191,601,544.20, including the purchase from CH. Karnchang Holding Co., Ltd. of the right to receive repayment, namely, the obligation under the Sponsors Support Agreement in the principal of Baht 162,532,889.44, and interest of Baht 25,379,996.36, totaling Baht 187,912,885.80 and the price would be Baht 244.25 per share upon including the obligation, thereby holding 3,206,820 shares representing 29.10 percent of the registered capital which PTW had produced and distributed the water at that time . - On June 30, 2006, CK purchased 826,500 shares in PTW from Berli Jucker Public Company Limited at the price of Baht 73.50 per share (book value = Baht (53.45) per share), totaling Baht 60,747,750, including the purchase from Berli Jucker Public Company Limited of the right to receive repayment, namely, the obligation under the Sponsors Support Agreement in the principal of Baht 79,390,000, and interest of Baht 47,567,520, totaling Baht 126,957,520 and the price would be Baht 227.11 per share upon including the obligation, thereby holding 4,033,320 shares representing 36.60 percent of the registered capital (Advisory Plus Co.,Ltd. as an independent financial advisor has evaluated of value of share in issuing the list of value of share evaluation of PTW dated June 20, 2006). - On September 25, 2006, CK was granted approval from its Board of Directors to purchase 659,000 shares in PTW from Mahasiri Siam Co., Ltd. at the price of Baht 73.50 per share (book value = Baht (53.45) per share), totaling Baht 48,436,500, including the purchase from Mahasiri Siam Co., Ltd. of the right to receive repayment, namely, the obligation under the Sponsors Support Agreement in the principal of Baht 73,938,167.77, and interest of Baht 31,590,253.05, totaling Baht 105,528,420.81 and the price would be Baht 233.63 per share upon including the obligation, thereby holding 4,692,320 shares representing 42.58 percent of the registered capital. 4. What is CK's policy on future investment in Pathum Thani Water Co., Ltd., and what would be the minimum proportion of shareholding and the relevant timeframe? CK has a policy on future investment in Pathum Thani Water Co., Ltd. by holding shares in long term and no more than 42.58 percent of the registered capital. 5. Reference is made to CK's notification that in respect of such investment in Pathum Thani Water Co., Ltd., CK would be required to purchase the right to receive repayment or assume the obligation to make further payment in proportion to the number of shares so purchased, under the Sponsors Support Agreement among CK, CH. Karnchang Holding Co., Ltd. and Mahasiri Siam Co., Ltd. as "Sponsors", and Pathum Thani Water Co., Ltd. as "Borrower", with the financial institutions. 5.1 How much are the total obligations under the Sponsors Support Agreement in respect of CK to date, including that as per this transaction, separated into loan and accrued interest, with disclosure of the material details of the Sponsors Support Agreement and the conditions of repayment or other relevant conditions? - The total obligations under the Sponsors Support Agreement in respect of CK to date include the principal of Baht 468,257,685, and interest of Baht 163,005,757.27, and when combined with that as per this transaction, amounting to the principal of Baht 542,195,852.77, and interest of Baht 194,596,010.32. - The details of the Sponsors Support Agreement are that the Sponsors agreed to provide financial support to Pathum Thani Water Co., Ltd. in the total amount of Baht 800,000,000, and in case of Pathum Thani Water Co., Ltd."s shortage of working capital, the Sponsors shall provide support in the total amount of Baht 300,000,000 on the condition that the repayment of the principal and accrued interest shall be made only when there is any cash flow remaining after the repayment of the interest and principal to the financial institutions. 5.2 Based on the foregoing notification by CK that only CK, CH. Karnchang Holding Co., Ltd. and Mahasiri Siam Co., Ltd. were the Sponsors under the Sponsors Support Agreement, why did not other shareholders assume the obligations in proportion to their respective shareholdings under the said Agreement? The reason that no other shareholders assumed the said obligations in proportion to their respective shareholdings under the said Agreement is because such Agreement was originally made among only the existing shareholders at such time, namely, Thames Water International (Thailand) Co., Ltd., CH. Karnchang Public Company Limited, CH. Karnchang Holding Co., Ltd., and Berli Jucker Public Company Limited. In this regard, other existing shareholders, namely, TMB Bank Public Company Limited, Krung Thai Public Company Limited as lenders to Pathum Thani Water Co., Ltd., and the Provincial Waterworks Authority as the concession owner, were not required to contribute funds in proportion to their shareholding in accordance with granting Concession Agreement. In this regard, the shareholders such as Capital Rice Company Limited and Bovis Limited have sold out of some shares prior the beginning of execution on Sponsors Support Agreement and they were therefore the minor shareholders holding shares less than 10%. Subsequently, when Thames Water International (Thailand) Co., Ltd. and/or Berli Jucker Public Company Limited sold and transferred their shares, the transferees of such shares shall thus assume the obligations in proportion accordingly. 6. CK notified that such transaction would be executed after receipt of approval from its Board of Directors and payment would be made in a single payment in cash out of the cash flow from CK's operation, please clarify the amount and the date on which CK would make such payment. CK would make such payment in cash out of the cash flow from CK's operation, in the amount of Baht 153,964,920.81 by October 2006. Please be informed accordingly. Very truly yours, (Mr. Anukool Tuntimas) Executive Vice President Human Resource and General Administration ?? ?? ?? ?? 6