Ratch PCL : Management Discussion and Analysis Quarter 2 Ending 30 Jun 2019

RATCH Group Public Company Limited

Management Discussion and Analysis

For the Three-month and Six-month Periods Ended 30 June, 2019

Management Discussion and Analysis

For the Three-month and Six-month Periods Ended 30 June, 2019

(Translation)

1. Significant events of the 2nd quarter of 2019

1.1 Change of the Company's name and seal

On April 12, 2019, the 2019 Shareholders' Annual General Meeting of the Company had approved the change of the Company's name and seal from Ratchaburi Electricity Generating Holding Public Company Limited to RATCH Group Public Company Limited. The Company has already registered the changes to the Department of Business Development, Ministry of Commerce on April 17, 2019. In this regard, the Company still uses the same stock symbol "RATCH".

1.2 Establishment of Hin Kong Power Holding Company Limited and Hin Kong Power Company

Limited

On May 24, 2019, the Company has established Hin Kong Power Holding Company Limited ("HKH"), which is the Company's wholly owned subsidiary. And on May 28, 2019, the Company has established Hin Kong Power Company Limited ("HKP"), which is fully owned by HKH. Each company's registered capital is Baht 4,000,000 divided into 400,000 ordinary shares, valuing at Baht 10 each and fully paid.

On July 12, 2019, HKP has entered into the Power Purchase Agreement for Hin Kong Power Project in Hin Kong Sub-district, Muang District, Ratchaburi Province with Electricity Generating Authority of Thailand. The agreement is effective from the execution date until the 25th year from the commercial operation date.

The project is a combined-cycle power plant project that used natural gas as the main fuel with total contracted capacity of 1,400 megawatts (700 megawatts per unit) according to the Power Purchase Agreement. It is scheduled for commercial operation in 2024 and 2025 respectively. At present, the project is in the process of preparing the Environmental Impact Assessment.

1.3 Commercial operations of Berkprai Cogeneration SPP Power Plant

On June 1, 2019, Berkprai Cogeneration SPP Power Plant with power generation capacity of approximately 100 megawatts and steam generation capacity of approximately 15 tons per hour, located in Berkprai Sub-district, Ban Pong District, Ratchaburi Province, operated by Berkprai Cogeneration Company Limited (an indirect joint venture which the Company held 35 percent stake through Ratchaburi Electricity Generating Company Limited), has commenced commercial operations.

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Management Discussion and Analysis

For the Three-month and Six-month Periods Ended 30 June, 2019

1.4 Establishment of a joint venture company to invest in underground optic fiber network project

On June 27, 2019, the Company and ALT Telecom Public Company Limited ("ALT") have registered a joint venture company to invest in underground optic fiber network project. The company named "Smart Infranet Company Limilted". Its registered capital of Baht 1 million, divided into 100,000 ordinary shares, valuing at Baht 10 each, and the capital is fully paid. The Company held 51 percent stake and ALT held 49 percent stake.

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Management Discussion and Analysis

For the Three-month and Six-month Periods Ended 30 June, 2019

2. Operation performance according to consolidated financial statement For the three-month period (April 1, 2019 - June 30, 2019)

Unit : Million Baht

Revenue from sales and rendering of services (excluding fuel cost) Revenue from finance lease contract

Share of profit of associates / joint ventures

Other incomes

Total revenues

Cost of sales and rendering of services (excluding fuel cost) Administrative expenses

Finance costs

Income tax expense

Total expenses

Non-controlling Interests

Profit before exchange rate - the Company and subsidiaries Gain (loss) on foreign exchange - the Company and subsidiaries Profit attributable to owner of the Company

The effect of exchange rate

• Gain (loss) on foreign exchange - the Company and subsidiaries
• Gain (loss) on foreign exchange - associates / joint ventures Profit attributable to owner of the Company before exchange rate

Quarter 2		Increase	%
			(Decrease)
2019		2018
2,135.19		1,588.22	546.97	34.4
738.69		853.62	(114.93)	(13.5)
1,281.83		1,727.16	(445.33)	(25.8)
232.17		243.44	(11.27)	(4.6)
4,387.88		4,412.44	(24.56)	(0.6)
1,265.51		1,163.53	101.98	8.8
480.28		372.11	108.17	29.1
250.93		403.07	(152.14)	(37.7)
215.17		164.03	51.14	31.2
2,211.89		2,102.74	109.15	5.2
2,175.99		2,309.70	(133.71)	(5.8)
-		(3.04)	3.04	100.0
2,175.99		2,306.66	(130.67)	(5.7)
(223.68)		(174.79)	(48.89)	(28.0)
1,952.31		2,131.87	(179.56)	(8.4)
(223.68)		(174.79)	(48.89)	(28.0)
(86.78)		554.62	(641.40)	(115.6)
2,262.77		1,752.04	510.73	29.2

Fuel Cost

7,930.03

8,296.77

The operating result according to the consolidated financial statement for the 2nd quarter of 2019 showed the profit (attributable to owners of the Company) of Baht 1,952.31 million or Baht 1.35 per share, decreasing by Baht 179.56 million, or 8.4 percent, compared with the profit of Baht 2,131.87 million or Baht 1.47 per share of the 2nd quarter of 2018. The operating result according to the consolidated financial statement for the 2nd quarter of 2019, withoutconsideration of the effect of foreign exchange gain (loss) of the Company, subsidiaries, associates, and joint ventures showed the profit of Baht 2,262.77 million, compared with the profit of Baht 1,752.04 million of the 2nd quarter of 2018, increasing by Baht 510.73 million, or 29.2 percent. The significant transactions were as follows:-

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Management Discussion and Analysis

For the Three-month and Six-month Periods Ended 30 June, 2019

2.1 Revenue from sales and rendering of services (excluding fuel costs)

Revenue from sales and rendering of services for the 2nd quarter of 2019 was Baht 2,135.19 million (excluding fuel costs of Baht 7,930.03 million), increasing by Baht 546.97 million or 34.4 percent from revenue from sales and rendering of services in the 2nd quarter of 2018 of Baht 1,588.22 million (excluding fuel costs of Baht 8,296.77 million). The main reason was the increase in revenue from sale of Ratchaburi Electricity Generating Company Limited, a subsidiary, in the amount of Baht 196.49 million due to the increase in Base Availability Credit in 2019 compared to that of 2018, as specified in the Power Purchase Agreement. Additionally, revenue from sale of RATCH-Australia Corporation Pty Ltd, a subsidiary, increased in the amount of Baht 349.98 million, due to the commencement of commercial operation of Mount Emerald Wind Farm Project and Collinsville Solar Power Project on December 12, 2018 and March 21, 2019, respectively.

1. Finance costs
   Finance costs for the 2nd quarter of 2019 was Baht 250.93 million, decreasing by Baht

152.14 million or 37.7 percent from Baht 403.07 million in the 2nd quarter of 2018. The decrease in finance cost of Baht 175.79 million was from the recognition on remeasurement to fair value of the derivative according to the adopted accounting policies for derivatives and hedge accounting.

1. Revenue from finance leases contracts

Revenue from finance lease contracts for the 2nd quarter of 2019 was Baht 738.69 million, decreasing by Baht 114.93 million or 13.5 percent from Baht 853.62 million in the 2nd quarter of 2018. The change was due to the decreased lease receivable, calculated according to the Effective Interest Method.

2.4 Cost of sales and rendering of services (excluding fuel costs)

Cost of sales and rendering of services for the 2nd quarter of 2019 was Baht 1,265.51 million (excluding fuel costs of Baht 7,930.03 million), increasing by Baht 101.98 million or 8.8 percent from cost of sales and rendering of services in the 2nd quarter of 2018 of Baht 1,163.53 million (excluding fuel costs of Baht 8,296.77 million). The main reason was cost of sales from RATCH-Australia Corporation Pty Ltd, a subsidiary, increased in the amount of Baht 106.33 million, due to the

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