Electricity Generating PCL : 22 February 2019 Management Discussion and Analysis Yearly Ending 31 Dec 2018

Management Discussion and Analysis

For the Annual Operating Results 2018

Ended December 31, 2018

Note: This Management Discussion and Analysis (MD&A) was made to disclose information and the vision of the management in order to assist investors to better understand the company's financial status and operation. It also supports the "Good Corporate Governance Project" of the Securities and Exchange Commission (SEC).

An English version of the MD&A has been prepared from the Thai version. In the event of a conflict or a difference in interpretation between the two languages, the Thai version shall prevail.

The objective of this MD&A is to present the information and the explanation of financial status and operating results as of the date hereof. However, the information provided in this MD&A may vary if any factors or situation are changed in the future; the investors are, therefore, required to have their own discretion regarding the usage of this information for any purpose. For further detail, please contact Investor Relations Division of the Electricity Generating Public Company Limited at Tel: [phone] or Email:[e-mail]

Management Discussion and Analysis

1. Power Industry and Competition

1.1 Electricity industry and Economic situation in Thailand

In 2018, Thailand's peak demand in Electricity Generating Authority of Thailand (EGAT)'s system was 28,338 megawatts, occurred on April 24, 2018 at 01.51 pm, lower than the peak demand of 28,578 megawatts in 2017 by 0.85% while the peak demand in 3 power authorities system (EGAT, Metropolitan Electricity Authority (MEA) and Provincial Electricity Authority (PEA) was 29,968 megawatts, lower than the peak demand of 30,303 megawatts in 2017 by 1.11%. A decrease in the peak demand was the consequence of cold weather in the beginning of the year and continuous raining as well as the increase of Independent Power Supply (IPS) and Small Power Producer (SPP) outside the EGAT system. In the meantime, electricity consumption of the country in EGAT system as of December 2018, including electricity consumption outside EGAT system as of November 2018 stood at 203,006 gigawatt-hours which were 1,840 gigawatt-hours or 0.91% increase from 201,166 gigawatt-hours in 2017. A growth of electricity consumption was mainly driven by the expansion of economy and thriving tourism.

As for economic outlook in 2019, National Economic and Social Development Board (NESDB) forecasted Thailand's economy to expand in the range of 3.50% to 4.50% (Mean 4.00%), lower than the expansion of 4.20% in 2018. A lower projection is mainly resulted from the uncertainty of trade protection and reciprocal retaliation between the United States of America and the People's Republic of China along with an increase in federal funds rate, which negatively affect trading-partner economies, world trade volume, global economy, and Thai exports to grow slower than expected

As of December 31, 2018, the country's contracted capacity in 3 power authorities system was 48,990 megawatts, 15,790 megawatts or 32.23% of which were generated by EGAT power plants, and the remaining from other producers, i.e.

•  Independent Power Producers (IPPs) 14,948 megawatts or 30.51%

•  Small Power Producers (SPPs) 8,757 megawatts or 17.88%

•  Very Small Power Producers (VSPPs) as of October 2018 5,617 megawatts or 11.46%

•  Neighboring Countries Power Producers 3,878 megawatts or 7.92%

EGCO's contracted capacity of electricity sold to EGAT was 3,332.08 megawatts, representing 6.80% of the country's contracted capacity in 3 power authorities system, as presented in Figure 1

Figure 1 The country's contracted capacity of electricity in 2018 classified by producers

VSPPs 11%

Import 8%

EGAT 32%

Source: EGAT and Department of Alternative Energy Development and Efficiency (DEDE)

In the recent year, the National Energy Policy Council (NEPC) had a plan to draft the new Power Development Plan (PDP) to portray a clear picture of power sector development since some planned power plants in PDP 2015 could not be constructed as planned along with electricity consumption behavior change, influenced by disruptive technology. The objectives of the new PDP aim to strengthen security of power supply for each region, maintain appropriate costs of power generation and focus on reducing environmental and social impacts by lessening carbon dioxide intensity in power generation. The new PDP has been approved by NEPC on January 24, 2019 after public hearing to obtain opinions and comments from private sector and others authorities has already been done.

Regarding the Alternative Energy Development Plan of 2015-2036 (AEDP 2015), power generation from renewable energy (including large hydropower) is targeted to be 19,684 megawatts in 2036. In 2018, the government has announced the plan to suspend the purchase of renewable power during the next five years because the country has sufficient reserve margin. According to the Department of Alternative Energy Development and Efficiency, the current status of renewable energy power plants as of October 31, 2018, which achieved the commercial operation date (COD) was 10,798 megawatts, increased from which of 2017 by 560 megawatts or 5.47%.

1.2 Electricity industry in Asia-Pacific countries

EGCO has envisioned slight growth prospect for domestic electricity industry. Therefore,

EGCO has thus worked out expansion plans in Asia-Pacific countries such as Republic of the Philippines, Laos People's Democratic Republic (Lao PDR), Republic of Indonesia and Commonwealth of Australia, where the company has established business bases. Investment of EGCO in each country is shown in Figure 2. To secure sustainable growth, EGCO has also been seeking for investment opportunities in other countries in the asia pacific region such as Socialist Republic of Vietnam, Union of Myanmar, State of Cambodia, Republic of Korea (South Korea) and Republic of China (Taiwan). To be well prepared for such endeavors, EGCO has consistently kept abreast of electricity industry situation in those targeted countries.

Figure 2 EGCO's equity contracted capacity of electricity in 2018 classified by country

Thailand

The

Philippines

Lao PDR

Indonesia

Australia

1.3 Competition

Overall picture in 2018 illustrated the active movements of power sector. On the government sector, the National Energy Policy Council or NEPC is drafting the new PDP. On the private sector, power companies are actively seeking for investment opportunities outside Thailand due to limited growth prospect for domestic electricity industry. This resulted in the intensified competition in overseas market. Despite the high competition in power industry, EGCO successfully enhanced its investment in a new project. On November 15, 2018, EGCO by Gen Plus B.V., has signed sale and purchase agreement to invest in a 49% ownership interest in Paju Energy Service Co.Ltd. (Paju ES), which owns and operates the Paju combined cycle power plant with an installed capacity of 1,823 megawatts (consists of 2 units of 911.50 megawatts each), which is located in Paju city, Gyeonggi Province, South Korea. The transaction is completed on 15 January 2019. Such acquisition not only enables EGCO to receive the immediate income, but also adds the economic value to the company in the long term. EGCO is satisfactorily competitive in power business which was resulted by favorable factors as follows;

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Human resources

Competence and expertise of EGCO personnel, experiences of its Board members,and good relationship with business alliances are the keys. EGCO personnel have dependable capabilities and experiences in power industry. Board members are competent persons from diverse business areas, many of whom are knowledgeable and long-time experienced in energy and electricity areas.

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EGCO's trustworthy

EGCO has planned to expand its investments to ensure a consistent and sustainablegrowth. The Company selected to invest in projects that generate good returns at an acceptable risk level, which has resulted in its satisfactory financial status, liquidity, and profit growth. This has helped the Company earn trust and confidence from banks and financial institutions in financially supporting its ongoing investments.

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Good relationship with communities surrounding power plants

As power generation may cause impact to nearby communities, EGCO alwaysoperates its power plants with full responsibility towards society and environment. EGCO discloses information without concealment, encourages public participation and maintains good relationship with nearby communities. Moreover, it supports local employment for income distribution and the well-being of local people. So far, EGCO has faced no complaints from communities surrounding its power plants

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Innovation

Since EGCO realizes the importance of organizational development to prepare forthe disruptive changes in the future, EGCO aims to incubate EGCO personnel with creative and innovative ideas, which can be applied to work process, increase work efficiency and obtain the competitive advantages over competitors. For instance, EGCO arranged innovation workshopped to encourage the process of innovative thinking to practical innovation including innovation competition "EGCO Group Innovation Team Challenge".

2. Significant events in 2018

2.1 The progress in construction projects

- Xayaburi Project, a project of the Xayaburi Power Company Limited, (EGCO holds a 12.50% ownership interest.), is a hydro power plant project, Run-of-River. The project is located in the Laos People's Democratic Republic (Laos PDR). The project has entered into the PPA with EGAT with the contracted capacity of 1,220 MW and Electricite De Laos (EDL) with the contracted capacity of 60 MW for 29 years. The construction of the project has progressed 97.45% (The construction plan was 97.09%). The commercial operation date is scheduled in the fourth quarter of 2019.