(Translation) Opinion of the Independent Financial Advisor on Divestment of Asset Transaction. TPI Polene Public Company Limited

Transcription

1 (Translation) Opinion of the Independent Financial Advisor on Divestment of Asset Transaction for TPI Polene Public Company Limited Prepared by JVS Financial Advisory Company Limited 31 March 2016 Disclaimer: The English translation report has been prepared solely for the convenience of foreign shareholders only. If there is discrepancy between the English translation and Thai report, the Thai report shall be definitive and the official document and supersede the English translation report in all aspect of any inconsistency with this English translation report

2 Table of Content Executive summary 6 Part 1 Divestment of asset transaction 1. General characteristics, type and size of the transaction 1.1 Transaction Date Related counterparties and their relationship General characteristics of the transaction Details of the disposed asset Value of consideration Value of the disposed asset Basis for determining value of consideration Plans on the usage of IPO proceedings Conditions for entering into the transaction Objectives, benefits, cons, and risk factors of the transaction 2.1 Objectives and background of the transaction Benefits of the transaction Cons of the transaction Risk factors Pre-emptive rights of shareholders Other factors Conflict of interests in the case of a Spin-off Plans on the usage of proceedings from the sale of TPIPP shares Valuation and conditions of the transaction 3.1 Fair value of the disposed asset Conditions of the transaction and opinions of the Independent Financial Advisor Summary of the opinions of the Independent Financial Advisor 87 Part 2 Information of the company Information of TPI Polene Public Company Limited (TPIPL) 94 Information of TPI Polene Power Company Limited (TPIPP) 107 Appendix 117 Summary of contracts information

3 Abbreviations and Definitions SEC, The Office of SEC The Stock Exchange, SET The Company, TPIPL The business, TPIPP Independent Financial Advisor The transaction IPO Pre-emptive Right Book Building Spin-off Securities and Exchange Commission of Thailand Stock Exchange of Thailand TPI Polene Public Company Limited TPI Polene Power Company Limited, a subsidiary of TPI Polene Public Company Limited which holds 99.99% of shares JVS Financial Advisory Company Limited The divestment of asset transaction regarding the approval of the initial public offering (IPO) of the shares of TPI Polene Power Company Limited, the Company s subsidiary and the plan to list in the Stock Exchange of Thailand The initial public offering of the new shares of TPIPP The offering of shares of TPIPP to the shareholders of the Company (TPIPL) according to the proportion of shares held in the Company Method of surveying the demand of a security Spin-off is the process of separating out a subsidiary or affiliate of a listed company (the parent company) through an Initial Public Offering (IPO) and listing the shares on the Stock Exchange of Thailand and after listing the subsidiary or affiliate, the parent company will still maintain the status of being a listed company of the stock exchange - 2 -

4 Technical Abbreviations and Definitions kj / kwh Base Tariff, TOU Rate Ft Adder FiT Unit RDF WHRP Unit of heat energy resulting from combustion of fuels to generate a unit of electricity power or Net Plant Heat Rate Reflects the investment cost of the power plant and transmission lines which reflects the real cost in each period under the assumed fuel price, exchange rates and some improvement in the efficiency of the electricity authority. Fuel Adjustment Charge that increases or decreases according to the changes in cost of fuel and electricity which the electricity authority cannot control that changes from the cost stipulated in the Base tariff. According to the price incentive measures for producers of electricity from renewable energy, an adder is funds to support the production of electricity from renewable energy by increasing electricity price during On Peak periods (periods of high electricity demand) and adding Ft during Off Peak periods. Feed-in Tariff or FiT is a policy created to promote the demand in buying electricity from renewable energy which is widely used to encourage investment from the private sector in the business of renewable energy power plants (due to the high cost of electricity production from renewable energy). The FiT rate will be in the form of fixed electricity purchasing rate throughout the project duration (with adjustments for those using fuel). The FiT rate will not change due to the change in the base tariff and the Ft, therefore making the price clear and fair. The Fit rate structure consists of 3 components (1) Fixed purchasing rate (FiTF) which will be stable throughout the project period (2) Variable purchasing rate (FiTV) which will increase according to the average core inflation of the previous year announced by the Ministry of Commerce (3) Special purchasing rate (FiT Premium) according to the government s policy in encouraging investment in certain fuels. Kwh Refused Derive Fuel or fuel from waste that has been separated, shredded and/or extracted of moisture in order to achieve a higher level of heat. Waste Heat from Cement Plant is using heat disposed from cement plant of the Company or TPIPL to produce electricity in the power plant of TPIPP

5 No. Jor. 040/ March 2016 Subject: Opinion of the Independent Financial Advisor on the divestment of asset of TPI Polene Public Company Limited. To: Audit Committee and Shareholders TPI Polene Public Company Limited Refer: 1) Resolution of TPI Polene Public Company Limited Board of Directors meeting No. 2/2559 held on 4 March 2016, which the Board of Directors had resolved to approve the plan to offer new shares of TPI Polene Power Company Limited, the Company s subsidiary through an Initial Public Offering (IPO) and plans to list the shares of TPI Polene Power Company Limited on the Stock Exchange of Thailand. The Board of Directors also set the date of the Annual General Meeting of Shareholders for ) Information memorandum on the divestment of asset of TPI Polene Public Company Limited regarding the plan to offer new shares of TPI Polene Power Company Limited, the Company s subsidiary through an Initial Public Offering (IPO) in the amount not exceeding 30% of the registered and paid up shares after the IPO. 3) Resolution of the Board of Directors Meeting of TPI Polene Power Company Limited since 2015 to date. 4) Financial Statements of TPI Polene Public Company Limited and subsidiaries audited by KPMG Poomchai Audit Company Limited ending 31 December 2013, 31 December 2014 and 31 December ) Financial Statements of TPI Polene Power Company Limited and subsidiaries audited by KPMG Poomchai Audit Company Limited ending 31 December 2013, 31 December 2014 and 31 December ) Power Purchase Agreement (PPA) between TPI Polene Power Company Limited and Electricity Generating Authority of Thailand, Letter notifying result of consideration to purchase electricity from Electricity Generating Authority of Thailand 7) Electricity sales contract between TPI Polene Public Company Limited and TPI Polene Power Company Limited. 8) Refused Derive Fuel (RDF) sales contract between TPI Polene Public Company Limited and TPI Polene Power Company Limited and raw materials sales contract between TPI Polene Bio Organics Company Limited and TPI Polene Power Company Limited. 9) Company Certificate, Memorandum of Association and other documents, including interviews with the management of TPI Polene Public Company Limited and subsidiaries including relevant advisors of the Company and subsidiaries

6 Disclaimers: 1) The study results and opinions, rendered by JVS Financial Advisory Company Limited ( Independent Financial Advisor or JVS FA ) in this report, are based on information and assumptions obtained from the management of TPI Polene Public Company Limited and its subsidiaries and also from publicly disclosed information available in websites of the Office of the Securities and Exchange Commission ( and of the Stock Exchange of Thailand ( 2) The Independent Financial Advisor will not be responsible or liable for any profit, loss or effect incurred by the Transaction and/or by the Company s future performance from the Transaction. 3) The Independent Financial Advisor's study was conducted by using knowledge, skills, and cautions, based on sound professional practices. 4) The Independent Financial Advisor determined and analyzed the Transaction based on current situations and information available to our knowledge. If there is any material adverse change and effect of the situations and information, it may affect the opinions provided herein by the Independent Financial Advisor. 5) The Independent Financial Advisor s opinions provided to TPI Polene Public Company Limited s Board of Directors, Audit Committee and shareholders do not ensure any success or completeness of the Transaction including the success of the share increase of TPIPP regarding the issuance and offering of new common shares to current shareholder according to proportions held (if any), the par value, dividend payment and/or the initial public offering of new shares and/or the approval to be listed on the Stock Exchange of Thailand from related government agencies which might impact TPIPP s operating result in the future

7 Executive Summary Background of the transaction The Board of directors meeting of TPI Polene Public Company Limited ( the Company ) No. 2/2016 held on 4 March 2016 has resolved to approve the initial public offering (IPO) of the shares of TPI Polene Power Company Limited ( TPIPP ) and list TPIPP in the Stock Exchange of Thailand ( The Stock Exchange ). The amount of IPO shares shall not exceed 30% of the registered and paid up shares after the IPO. The Board of Directors approved to propose the matter to the Shareholder s meeting to consider approving the plan. The reason why the Company is listing TPIPP in the SET is because TPIPP needs funds to expand its business in the future. Therefore, listing on the SET will allow TPIPP to tap new funding from the capital market which would allow TPIPP to be able to raise funds on its own and make plans about the appropriate capital structure on its own. This will strengthen TPIPP s financial status. It would improve business competitiveness as well as TPIPP s and the Company s performance in the future. For the IPO, the Company will not receive any cash proceeds from these offer of shares of TPIPP to the general public. However, when TPIPP receives the proceeds from the IPO, TPIPP plans to use a portion of proceeds to repay parent debt to the Company (See details in section 1.8 Plans for use of proceeds from the IPO). TPIPP s IPO and listing in the SET is considered an acquisition of assets pursuant to the Notification of the Capital Market Supervisory Board No. Thor. Jor. 2 0 / entitled Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and its amendments and the Notification of the Board of Governors of the Stock Exchange of Thailand entitled Disclosure of Information and Other Acts of Listed Company concerning the Acquisition and Divestment of Assets, B.E (2004) and its amendments (collectively referred to as the Acquisition or Disposal Notification ). When considering the transaction size, the size of the above transaction is of the highest value when calculated based on the Net Profit criteria which equals to 84.18% and classified as Class 1 Transaction which is higher than 50% but lower than 100%. Therefore, the Company is required to disclose certain information regarding the entering into the above transaction to the SET according to information memorandum account (1 ) attached to the Acquisition or Disposal Notification and is required to hold a Shareholders Meeting to consider and approve the transaction in a timely manner. Also the Company must appoint an Independent Financial Advisor to give opinions on the transaction. Appropriateness of the fair value IFA has considered and opines that this transaction which is the divestment of assets of TPI Polene Public Company Limited ( The Company ) is considered as a divestment of asset transaction regarding the approval of the initial public offering (IPO) of the shares of TPI Polene Power Company Limited, the Company s subsidiary and the plan to list in the Stock Exchange of Thailand. Therefore the asset divestment will be in the form of TPIPP issuing and offering new shares to the public as an IPO. The IPO is expected to occur in quarter 4 of Therefore, the price of TPIPP s shares to be sold cannot yet be determined in the present time. In stipulating the price, TPIPP will appoint an underwriter under a normal IPO processes, which would include the Book Building process (a method of surveying institutional investor s demand for such security) or other processes in order to set the offering price depending on the appropriateness of the fund raising value, market conditions and underwriter. Also, the offer price can be stipulated using other methods such as - 6 -

8 comparing performances with companies that operate similar businesses as TPIPP and valuating using Discounted Cashflow method in which the Company and related parties will proceed further on. However, IFA opines that the appropriate fair value valuation method of TPIPP is the Discounted Cashflow Approach, in which the value of TPIPP s shares is between approximately 31,637 46,672 million baht. The Market Comparable Approach, Price to Book Value Approach and Price to Earnings Ratio Approach, as a comparison, results in a value of approximately 16,000 35,000 million baht. However, due to the time of TPIPP s IPO which is expected to be in quarter 4 of 2016, many factors may change such as market conditions and approval from government agencies as well as changes in the actual offer price and performance of TPIPP in 2016 which will affect the book value and profit of TPIPP including other factors such as similar businesses used as comparables and investment atmosphere at that time, IFA opines that from these uncertainties, the value of shares of TPIPP evaluated by IFA to be information for making considerations, may be subject to change and should be reevaluated again during the time of the IPO. Reasonableness of the Transaction IFA opines that TPIPP as a subsidiary of the Company has appropriate qualities in terms of shareholder s equity, past performance and the appropriate business with potential for future growth. Also, TPIPP has needs of new funding and by issusing new shares through IPO and listing on the SET, TPIPP would have additional channels to raise funds on its own and make plans about the appropriate capital structure on its own. This would strengthen TPIPP s financial status. It will improve business competitiveness as well as TPIPP s and the Company s performance in the future. Benefits, Cons, and Risk Factors of the Company and TPIPP in entering the transaction can be summarized as follows: Benefits of the Transaction To the Company 1) The Company will be able to decrease investment burden and/or additional financial support to TPIPP since TPIPP will be able to expand its business by raising funds through the SET and/or the capital market such as issuing stocks, bonds to the public or as private placements in which TPIPP s shares will have liquidity since it is traded on the SET. 2) The Company will divide the business structure to be more clear which will allow clarity and flexibility in the management, development, and investment in the electricity production and distribution and related products including natural gas and fuel stations. 3) When TPIPP becomes a listed company in the SET, the investment value in TPIPP of the Company will reflect the market price by having the share market price in the SET as reference, allowing the Company s share price to reflect a more accurate value of the subsidiary or TPIPP. 4) When TPIPP becomes a listed company in the SET, the Company will be able to sell the common shares of TPIPP in the SET in the future and receive gain (or loss) from the difference between the share price in the SET and the book value of TPIPP in the Company s account. However, the shares of TPIPP once listed in the SET will have liquidity and have a reference market price for future buy or sell decisions

9 5) After the transaction by conducting a Spin-Off of TPIPP through the plan to IPO the new shares of TPIPP and list TPIPP s shares in the SET, the Company will have a subsidiary that has financial stability, which has the ability to raise its own funds and reflect the intrinsic value of the investment in TPIPP back to the Company. Benefits to TPIPP 1) Through IPO, TPIPP (the Company s subsidiary), will receive funds from the IPO to invest in its business expansion in future power plant projects. Also, the TPIPP will have working capital to support financial flexibility and support liquidity s need. 2) By listing on the SET, TPIPP will gain benefit from being a listed company in terms of direct capital raising without needing to depend on the Company and the increase in fund raising channels, whether through equity and debt instruments to a much larger pool of investors who are interested in investing in the energy business and/or investment in debentures of an energy business. Also, when TPIPP is able to raise funds on its own, it will decrease the funds dependency from the parent company and/or loans from banks. Having various types and channels to raise funds will increase potential in accessing funds and allow TPIPP to grow and expand its business in the future. 3) When TPIPP becomes a listed company in the SET, TPIPP will have increase transparency through disclosure and be analyzed by analysts both in the country and other countries which will promote TPIPP to be more well known, improve company image and TPIPP could become more acceptance to financial instutions, trading partners, customers and trade creditors by being able to providing access quality disclosed information from various sources in the future. 4) After the IPO, TPIPP will have a much stronger financial structure with lower debt to equity ratio and TPIPP will be able to raise funds on its own through the SET to expand business in the future. Benefits to the Company s shareholders 1) To be as an alternative investment for its shareholders, in which they could choose to investment in the Company and/or TPIPP according to each individual s investment interests. 2) To recognize an enterprise true value, whereas the value of shares in which the Company invested in TPIPP will be able to be compared with the market price of TPIPP when traded in the SET and may indirectly increase value of TPIPP which will benefit the shareholders of the Company. Therefore, the Company s share price will better reflect the value of this subsidiary or TPIPP by having a reference market price. 3) To enhance an opportunity to increase value of the Company in the future. After TPIPP who is a 70% owned subsidiary of the Company is able to achieved IPO, TPIPP would have a much stronger financial structure, i.e. lower debt to equity ratio and TPIPP would be able to raise funds on its own through the SET to expand business in the future

10 Cons of the transaction Effects on the Company 1) The IPO will decrease the Company s holding proportion in TPIPP from 99.99% to no less than 70.00% creating Earning Dilution and Controlling Dilution of no more than 30% calculated from 1 (Q 0 / (Q 0 + Q 1 )) where Q 0 = 59,000,000 shares (amount of TPIPP s shares as of 31/12/16) and Q 1 = 25,000,000 shares (estimated IPO shares) which will equal to 29.76% or no more than 30%. Therefore, the decrease in shareholding proportion in TPIPP in the short term might affect the Company s performance in which the total performance from TPIPP will decrease in proportion from 99.99% to no less than 70.00% (earning dilution) after the IPO. However, after the IPO in which TPIPP has the objective to use the IPO proceeds to expand its business as relieve debt obligations. Therefore, TPIPP s performance will improve in the future. 2) Since the Company and TPIPP are conducting related business which are connected with each other by having a Power Purchase Agreement with each other. However, TPIPP will operate without creating conflict of interest that will affect the gain or loss of benefit in either party and/or will operate the businesses with transparency in connected transactions such as using the market price or the appropriate price in normal business practices as if with other non-related parties (arm s length transaction) that will be beneficial, fair and reasonable for the transaction for both companies. Hence, in future connected transactions, the Company will comply with the connected transactions procedures which require more operational processes and take more time such as transactions that have a large transaction size will need to be approved from the Company s shareholders etc. Effects on TPIPP 1) By listing on the SET, TPIPP will have increase transparency through disclosure. TPIPP is obliged to disclose necessary information to the public which some information may be beneficial to TPIPP s competitors. 2) Since the Company and TPIPP are conducting related business which are connected with each other by having a Power Purchase Agreement with each other. However, TPIPP will operate without creating conflict of interest that will affect the gain or loss of benefit in either party and/or will operate the businesses with transparency in connected transactions such as using the market price or the appropriate price in normal business practices as if with other non-related parties (arm s length transaction) that will be beneficial, fair and reasonable for the transaction for both companies. Hence, in future connected transactions, the Company will comply with the connected transactions procedures which require more operational processes and take more time such as transactions that have a large transaction size will need to be approved from the Company s shareholders etc. Effects on the shareholders of the Company 1) The IPO will decrease the Company s holding proportion in TPIPP from % 99.99to no less than % 70.00creating Earning Dilution and Controlling Dilution of no more than % 30calculated from 1 (Q) / 0Q + 0Q (( 1where Q59 = 0,000, 000shares (amount of TPIPP s shares as of ( 16/12/ 31and Q25 = 1,000, 000shares (estimated IPO shares) which will equal to % 29.76or no more than.% 30Therefore, the Company s shareholders will be indirectly affected from the dilution in the holding of TPIPP s shares through the Company (see opinions of the Independent Financial Advisor in 2.5Pre-emptive rights)

11 Analysis of effects from the Spin-Off to the Company regarding Earnings dilution Assumptions of the analysis 1. 3 years historical financial information of the Company using total revenue and net profit from the Company s consolidated financial statements without making any adjustments. The figures are used for analysis and comparison in the big picture only years historical financial information of TPIPP using total revenue and net profit from the Company s consolidated financial statements without making any adjustments. The figures are used for analysis and comparison in the big picture only (except for the net profit of TPIPP in 2015 which was adjusted by adding back loss from sale of investment in a subsidiary from the business restructuring). Key factors for the assumptions of the analysis 1. A past performance is not the only indicators of future performances. 2. TPIPP is in the process of business expansion. Therefore the 3 year historical financial information may not reflect future performances. (unit : million baht) Comparison of total revenue TPIPL 28, , , TPIPP 2, , , Proportionate comparison of TPIPP/TPIPL 7.50% 6.90% 9.56% 70% 5.25% 4.83% 6.69% 30% 2.25% 2.07% 2.87% Effect on revenue of TPIPL to decrease % of effect on the total revenue of TPIPL 2.25% 2.07% 2.87% (unit : million baht) Adjusted * Comparison of net profit TPIPL , TPIPP , ^ Proportionate comparison of TPIPP/TPIPL 54.36% 27.80% % % 70% 38.05% 19.46% 94.92% % 30% 16.31% 8.34% 40.68% 84.18% Effect on net profit of TPIPL to decrease % of effect on the net profit of TPIPL 16.31% 8.34% 40.68% 84.18% Note: * In 2015, the net profit of TPIPP in 2015 which was adjusted by adding back loss from sale of investment in a subsidiary amounting to million baht

12 From the above table, comparing total revenue of TPIPP and TPIPL, the dilution is only 30%. As for accounting effects to the Company s consolidated financial statements, the Company will still book total revenue of both companies (including other subsidiaries) as well as cost of sales and expenses. The net profit will be classified as net profit of the parent company and non-controlling interest (net profit of the parent company equals total net profit deducted by net profit of non-controlling interest). Opinion of the Independent Financial Advisor on the earnings dilution IFA opines that since the business of production and distribution of electricity of TPIPP is in the process of business expansion from the investment in power plants of TPIPP and the business of manufacturing and supplying cement, ready-mixed cement and plastic resins of TPIPL is in a recession state as the economy and Thailand s construction industry. Although the Spin-Off will create earning dilution to the Company, but with the revenue and profit of TPIPP is expected to grow in 2016 and 2017 at no less than 30% per year from Therefore, by holding shares of TPIPP in the proportion of 99.99% decreasing to 70.00% in which the business is a business that will grow at no less than 30%, the profit received despite the decrease in share proportion will not decrease. Also, TPIPP s IPO uses the book building method with institutional investors both domestically and internationally will enable the company to sell its shares at an appropriate price. The proceeds from the IPO will go to TPIPP and will increases equity value in the same proportion. Moreover, TPIPP plans to mainly use the proceeds to expand its business for business growth and financial stability. IFA opines that, although the Company will be affected by the dilution of earnings, from the decrease in shareholding proportion in TPIPP in the short term, however, after that the Company is expected to get better returns from the investment in TPIPP in the future. Risk Factors 1) Risk in conducting an IPO depends on the approval of the Securities and Exchange Commission and the application to list shares in the Stock Exchange of Thailand depends on the approval in the listing of shares and/or approval from related government agencies as well as TPIPP s readiness in transparency, internal control and audit standards and including readiness in disclosing information according to the rules and regulations of the SET and other related laws. 2) Risk from the success in the IPO regarding the appropriate price and amount of funds rising which is dependent on the investment situation in the stock exchange, the country s economy and other related factors. 3) Risk from receiving approval from the shareholders of the Company and TPIPP and other related transactions in which key transactions must receive votes of no less than ¾ of the shareholders who attend the meeting and has the right to vote. However, since the Company holds 99.99% shares of TPIPP, there is no risk in this part. The fair value of the transaction which TPIPP s share offer price through IPO using Book Building Process that is a method of surveying the demand for securities by institutional investors. IFA opines that the method is appropriate because it is derived from the demand survey of institutional investors who have to analyzed the fundamentals of TPIPP as well as

13 TPIPP s performances in the past and in the future, along with economic, money market, capital market conditions before making an investment decision. The offering by using the Book Building Process would pass the process of making the final decision about the price. The price through book building will depend on the appropriateness of the funds raised, market conditions, and underwriter. Also, the price may be derived by other methods such as by comparing the performances of TPIPP with other companies that have similar businesses as well as using the Discounted Cashflow method in which the Company and/or TPIPP, TPIPP s financial advisor and underwriter(s) will make the final decision on the price together. As for the Pre-emptive Rights which is no more than 5.00% of TPIPP s IPO shares, by needing to increase capital to conduct the IPO, the proportion held in TPIPP of the Company will decrease from 99.99% to no less than 70.00% (Dilution Effect) will affect the shareholders of the Company to have a decrease in shareholding proportion in TPIPP of no less than 30%, the dilution affect is more than the pre-emptive right which is no more than 5.00% of the IPO of TPIPP (or no more than 1.5% of total shares of TPIPP after IPO). However, the shareholders may buy additional IPO shares of TPIPP as appropriate in the future. Therefore, after considering the benefits, cons and risks, IFA opines that the divestment of asset in this transaction is reasonable and creates benefit to the Company and the Company s shareholders as a whole. Therefore, the Company s shareholders should resolve to approve the divestment of asset transaction. Nonetheless, the consideration whether to approve the Company to enter into the Transaction mainly depends on discretion of the Company s shareholders. The Company s shareholders can review the Company s other information and the report of the Independent Financial Advisor s opinions

14 Part 1 Divestment of Asset Transaction

15 1. General characteristics, type and size of the transaction 1.1 Transaction Date The offering of the new shares of TPIPP through IPO and listing TPIPP on the SET will be subject to the success of the conditions in item 10 which is expected to be accomplished by quarter 4 of Related counterparties and their relationship Share offerer Share buyer : TPIPP as the Company s subsidiary : General public both domestic and international (to be called together as the general public ) 1.3 General characteristics of the transaction The Company s Board of Directors meeting No. 2/2559 held on 4 March 2016, resolved to approve the plan to offer new shares of TPIPP through an Initial Public Offering (IPO) and to list the shares of TPIPP on the Stock Exchange of Thailand which is expected to be accomplished by quarter 4 of TPIPP will submit for approval of the IPO and listing of shares by setting the IPO amount to be no more than 30% of the total paid up shares after IPO. The IPO will decrease the Company s holding proportion in TPIPP from 99.99% to no less than 70.00% of the total paid up shares after IPO in which TPIPP will still be a subsidiary of the Company. The group will have shareholding structure before and after IPO as follows:

16 Current shareholding structure as of 31 December 2016 TPI Polene Public Company Limited (Manufacture and distribute Cement Ready-mixed Concrete LDPE/EVA plastic resins / Industrial Waste Disposal / Liquid fuel / Concrete tiles / Fiber cement / Light weight Concrete / Drinking Water) 99.99% 99.97% Construction Industry Petrochemical Industry อ Agriculture and other อ ต industries ต ส 99.99% ส TPI Concrete Co.,Ltd. TPI All Seasons Co., Ltd. า 99.99% า (Ready-mixed Concrete) (Plastic products / Polene Solar ห (Not in operation) ห and VAE glue) ก ก 50.00% Thai Nitrate Co., Ltd % ร ร (Ammonia and nitric acid) ** ร ร 48.96% ม Mondo Thai Co., Ltd. ม 29.53% 28.75% ว (Real estate) ป Thai Special Steel Industry PCL ส โ (Steel)* ด ต 19.00% (Packaging) ก ร อ 0.65% เ TPI Intertrade Co., Ltd. ส ค (overseas investment) ร ม 99.94% า ง % 99.99% 99.99% 51.00% 99.80% % Thai Propoxide Co., Ltd. Bangkok Union Life Insurance Public Co., Ltd. (Life Insurance) United Grain Industry Co., Ltd. Pornchai Enterprises Co., Ltd. (Real estate development) TPI Commercial Co., Ltd. (Group s retail business) TPI Polene Bio Organics Co., Ltd. (humic and grow organic fertilizer, pyroligneous acid) Polene Plastic Co., Ltd (Export cement and plastic resins) TPI Service Co., Ltd. (Former name Jade Mineral Co.,Ltd.) (Construction) Energy Industry อ ต ส า TPI Polene Power Co., Ltd. (electricity and related products ห / % oil and stations) ก ร ร ม ก า ร เ ก ษ ต ร แ ล ะ อ น ๆ TPI Power Co., Ltd. (overseas investment) TPI Refinery (1997) Co., Ltd. (Petroleum exploration) 1.1 Note : * Currently already reached an agreement between the creditor % and debtor and is in process of approval from related courts. ** Holds 50% by the Company according to the name of shareholders of Thai Nitrate Co., Ltd. (BOJ 5) at the Department of Business Development, Ministry of Commerce

17 Shareholding structure after IPO TPI Polene Public Company Limited (Manufacture and distribute Cement Ready-mixed Concrete LDPE/EVA plastic resins / Industrial Waste Disposal / Liquid fuel / Concrete tiles / Fiber cement / Light weight Concrete / Drinking Water) 99.99% 99.97% Construction Industry Petrochemical Industry อ Agriculture and other อ ต industries ต ส 99.99% ส TPI Concrete Co.,Ltd. TPI All Seasons Co., Ltd. า 99.99% า (Ready-mixed Concrete) (Plastic products / Polene Solar ห (Not in operation) ห and VAE glue) ก ก 50.00% Thai Nitrate Co., Ltd % ร ร (Ammonia and nitric acid) ** ร ร 48.96% ม Mondo Thai Co., Ltd. ม 29.53% 28.75% ว (Real estate) ป Thai Special Steel Industry PCL ส โ (Steel)* ด ต 19.00% (Packaging) ก ร อ 0.65% เ TPI Intertrade Co., Ltd. ส ค (overseas investment) ร ม 99.94% า ง % 99.99% 99.99% 51.00% 99.80% Thai Propoxide Co., Ltd. Bangkok Union Life Insurance Public Co., Ltd. (Life Insurance) United Grain Industry Co., Ltd. Pornchai Enterprises Co., Ltd. (Real estate development) TPI Commercial Co., Ltd. (Group s retail business) TPI Polene Bio Organics Co., Ltd. (humic and grow organic fertilizer, pyroligneous acid) Polene Plastic Co., Ltd (Export cement and plastic resins) TPI Service Co., Ltd. (Former name Jade Mineral Co.,Ltd.) (Construction) Energy Industry อ ต ส า TPI Polene Power Co., Ltd. (electricity and related products ห / >70 % oil and stations) ก ร <30% ร General Public ม ก า ร เ ก ษ ต ร แ ล ะ อ น ๆ TPI Power Co., Ltd. (overseas investment) 1.1 TPI Refinery (1997) Co., Ltd. (Petroleum exploration) Note : * Currently already reached an agreement between the creditor and debtor and is in process of approval from related courts. ** % Holds 50% by the Company according to the name of shareholders of Thai Nitrate Co., Ltd. (BOJ 5) at the Department of Business Development, Ministry of Commerce %

18 The transaction is considered as a divestment of asset transaction in which the transaction size using financial information of the Company and consolidated financial statements of TPIPP for the year 2015 ending 31 December 2015 audited by an auditor has details as follow: Calculation Basis Formula and calculation 1. Net Tangible Asset (NTA) = NTA of TPIPP according to proportion disposed / NTA of the Company = (9, million baht x 30%) / 55, million baht = 4.87% 2. Net Profit = Net profit of TPIPP according to proportion disposed / Net profit of the Company in the consolidated financial statements = (1, million baht x 30%) / million baht = 84.18% 3. Total value of consideration = Book value per share of TPIPP x proportion sold / Total asset of the Company in the consolidated financial statements = (9, million baht / 59 million shares) x (59 million shares x 30% / 70%) / 107, million baht = 3.60% 4. Equity share value = Not applicable as the Company does not issue shares for payment The calculation of transaction size as detailed above has the highest value of 84.18% which derived from the Net Profit method and is classified as a Class 1 Transaction which is higher than 50 per cent but lower than 100 percent. Accordingly, the Company is required to immediately disclose information regarding the entering into the above transaction with details at least according to the requirements of account (1) in the attachment to the Acquisition or Disposal Notification and is required to hold a Shareholders Meeting to consider and approve the transaction including appointing an Independent Financial Advisor ( IFA ) to give an opinion on the transaction for the SET and shareholders

19 1.4 Details of the disposed asset Details of the Initial Public Offering (IPO) of TPIPP Offerer Type of security offered Number of offered new shares Par value Offer price Offer period Other details TPI Polene Power Company Limited or TPIPP (has not yet converted to a public company limited) New common shares of TPIPP (currently, the common shares of TPIPP is not a listed security in the SET) No more than 30% of total paid up shares after IPO 100 baht per share (may change) Not yet specified. The price will be considered from the demand of investors (Book Building) After approval from the SEC for TPIPP to IPO and the filing and prospectus becomes effective, in which it is expected to be accomplished in quarter 4 of 2016 The Company will inform other details of the IPO of TPIPP to the shareholders of the Company Note: The details above are subject to change according to the Board of Directors and/or persons appointed by the Board of Directors as appropriate. However, the amount of IPO of TPIPP that will be offered will not exceed 30% of total paid up shares after IPO

20 1.4.2 Information of TPIPP Business type Head Office Location Registered and Paid-up Capital Current par value Electricity production and distribution and related products including fuel and natural gas stations. 26/56 Chan Tat Mai Rd., Tungmahamek, Sathorn, Bangkok 5,900,000,000 baht 100 baht per share The Board of Directors of TPIPP as of 4 March 2016 consists of 15 persons as follow: Name (1( Position in TPIPP % shares held in TPIPP as of 29 Feb 2016 (shares/%) Position in the Company % shares held in the Company as of 21 Dec 2015 (shares/%) (2) Mr. Prachai Leophairatana Chairman of the Board 1/0.0 Director Included together in the share holdings of Mrs. Orapin Leophairatana according to clause 258 of the Securities and Exchange Act. Mr. Prateep Leophairatana Vice Chairman 1/0.0 Director 1,940,000/0.01 Mr. Pramual Leophairatana Vice Chairman 2/0.0 Director 808,900,000/4.01 Mrs. Orapin Leophairatana Vice Chairman 1/0.0 Director 867,246,240/4.29 Mr. Prayat Leophairatana Director 1/0.0 Director 883,217,140/4.37 Mr. Pakorn Leophairatana Director ,745,810/4.27 Ms. Pattaraphan Leophairatana Director ,077,220/3.12 Mr. Pakapol Leophairatana Director ,904,800/0.40 Mrs. Nitawan Leophairatana Director ,592,620/0.20 Mr. Manu Leophairatana Independent Director ,080/0.00 and Chairman of the Audit Committee Mr. Thiraphong Vikitset Independent Director ,140/0.00 and Audit Committee Mr. Apichai Chantarasean Independent Director and Audit Committee Mr. Khantachai Vichakkhana Independent Director - Director 27,760/0.00 Ms. Malinee Leophairatana Director - - 8,143,080/0.04 Mr. Vanchai Manosutthi Independent Director - - Note: (1) As of 4 March 2016, the Board of Directors of TPIPP appointed Mr. Vanchai Manosutthi as an additional board member. (2) The shareholding proportion already included shares held by related persons

21 Summary of the financial position and financial performance of TPIPP for the years ending 31 December 2013, 2014 and Unit : million baht Separate financial statements Revenue from sale of goods Other income Total income Cost of sales of goods Selling expenses Administrative expenses Loss from investments in associates Loss from change in fair value of available-for-sale investments Loss from net foreign exchange Gain from impairment of share value of the parent company Finance costs Income tax (expense) income Net Profit (loss) Total assets Total liabilities Shareholder s Equity Paid-up capital 2, , , , , , , , , , (18.06) , , , , , , , , , , , Summary of the financial position and financial performance of TPIPP and subsidiaries for the years ending 31 December 2013, 2014 and Unit : million baht Consolidated financial statements of TPIPP and subsidiaries * Revenue from sale of goods Reversal of impairment of share value of the parent company Gain from foreign exchange Other income Total income Cost of sales of goods Selling expenses Administrative expenses Loss from net foreign exchange Finance costs Income tax (expense) income Net Profit (loss) Total assets Total liabilities Shareholder s Equity Paid-up capital 9, , , , , , , , Note : * The financial statements of TPIPP and subsidiaries were made only for year 2015 compared with , , , (13.33) , , , ,

22 1.5 Value of consideration The value of consideration will be according to the offering price of the IPO shares of TPIPP. Currently the price has not yet been specified. 1.6 Value of the disposed asset The disposed asset is the new shares of TPIPP which will in return receive proceeds from investors. Currently the IPO price has not yet been specified. However, the book value of TPIPP according to the financial statements is 9, million baht. When calculated with the amount of new shares of no more than 30% of paid up shares after IPO, the value of the disposed asset will be equal to 3, million baht. 1.7 Basis for determining value of consideration Currently the IPO price has not yet been specified. 1.8 Plans on the usage of IPO proceedings TPIPP plans to use the IPO proceedings for: 1) Business expansion in the future 2) Relieve financial debt to TPIPL and/or 3) Use as working capital of TPIPP (See details in section 2.7 Plans for use of proceeds from the IPO and the opinion of IFA) 1.9 Conditions for entering into the transaction 1) The Company must receive approval from the Company s shareholders meeting to offer the new shares of TPIPP through IPO and to list the shares of TPIPP on the SET. 2) The shareholders meeting of TPIPP approve the listing of TPIPP s shares on the SET and the capital increase to do the IPO. 3) TPIPP converts to a Public Company Limited and increase registered shares with the Department of Business Development, Ministry of Commerce. 4) TPIPP receives approval from the SEC for TPIPP to IPO and the filing and prospectus becomes effective. 5) The SET approves the listing of TPIPP s shares with conditions that the free-float requirement must be met. 6) TPIPP registered the change in paid-up capital after the IPO, which it is expected to be accomplished in quarter 4 of

23 2. Objectives, benefits, cons, and risk factors of the transaction 2.1 Objectives and background of the transaction The Board of Directors meeting of TPI Polene Public Company Limited ( the Company ) No. 2/2559 held on 4 March 2016, resolved to approve the plan to offer new shares of TPI Polene Power Company Limited ( TPIPP ) through an Initial Public Offering (IPO) and list the shares of TPIPP on the Stock Exchange of Thailand ( SET ) in which the amount of IPO shares shall not exceed 30% of the registered and paid up shares after the IPO. The Board of Directors approved to propose the matter to the Shareholder s meeting to consider approving the plan. The reason why the Company is listing TPIPP in the SET is because TPIPP needs funds to expand its business in the future. Therefore, listing on the SET will allow TPIPP to tap funds from the capital market which will allow TPIPP to be able to raise funds on its own and make plans about the appropriate capital structure on its own. This will strengthen TPIPP s financial status which will improve business competitiveness as well as TPIPP s and the Company s performance in the future. For the IPO, the Company will not receive cash proceeds from the offering of shares of TPIPP to the general public. However, when TPIPP receives the proceeds from the IPO, TPIPP plans to use a portion of proceeds to repay debt to the Company (See details in section 1.8 Plans for use of proceeds from the IPO). TPIPP s IPO and listing in the SET is considered an acquisition of assets pursuant to the Notification of the Capital Market Supervisory Board No. ThorJor. 20/2551 entitled Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets and its amendments and the Notification of the Board of Governors of the Stock Exchange of Thailand entitled Disclosure of Information and Other Acts of Listed Company concerning the Acquisition and Divestment of Assets, B.E (2004) and its amendments (collectively referred to as the Acquisition or Disposal Notification ). When considering the transaction size, the size of the above transaction is of the highest value when calculated based on the Net Profit criteria which equals to 84.18% and classified as Class 1 Transaction which is higher than 50% but lower than 100%. Therefore, the Company is required to disclose certain information regarding the entering into the above transaction to the SET according to information memorandum account (1) attached to the Acquisition or Disposal Notification and is required to hold a Shareholders Meeting to consider and approve the transaction in a timely manner. Also the Company must appoint an Independent Financial Advisor to give opinions on the transaction

24 2.1.1 Details of the IPO of TPIPP Offerer : TPI Polene Power Company Limited (TPIPP) (has not yet converted to a public company limited) Type of security offered : Common shares of TPIPP Number of offered new shares : No more than 30% of total paid up shares after IPO Par value : 100 baht per share (may change) Offering method : Offered to the general public Offer price : Not yet specified. The price will be considered from the demand of investors (Book Building) Offer period : After approval from the SEC for TPIPP to IPO and the filing and prospectus becomes effective, in which it is expected to be accomplished in quarter 4 of 2016 Note: The details above are subject to change according to the Board of Directors and/or persons appointed by the Board of Directors as appropriate. However, the amount of IPO of TPIPP that will be offered will not exceed 30% of total paid up shares after IPO Information of TPI Polene Power Company Limited Business type : Electricity production and distribution and related products including fuel and natural gas stations. Head Office Location : 26/56 Chan Tat Mai Rd., Tungmahamek, Sathorn, Bangkok Registered capital according to Spin-off plan : Current Registered and Paid-up Capital is 5,900 million baht or 59 million shares at par value of 100 baht per share TPI Polene Power Company Limited ( TPI Polene Power or TPIPP ) was established on 11 November 1991 which is held 99.99% by TPI Polene Public Company Limited. As of 30 June 2015, TPIPP has Registered Capital of 5,900,000,000 and Paid-up Capital of 5,900,000,000 baht. TPIPP conducts the main business of electricity production, RDF and distribution of fuel & natural gas stations in Bangkok and other provinces (consisting of 11 fuel stations and 4 natural gas station). TPIPP is the producer and distributer of electricity using waste heat from cement plants of TPIPL to produce electricity consisting of 2 Waste Heat from Cement Plants of 20 MW and 1 Waste Heat from Cement Plant of 30 MW for a total of Waste Heat from Cement Plants of 70 MW. Also, TPIPP has 2 Refused Derive Fuel or RDF plants for 20 MW and 60 MW which started selling electricity to the Electricity Generating Authority of Thailand under the Non-Firm Power Purchase Agreement of 18 MW and 55 MW in January 2015 and August 2015, respectively. Currently, the company is constructing a 70 MW Refused Derive Fuel plant which is expected to be finished in the end of 2016 and will combine the electricity from this plant along with the Waste Heat plant of 30 MW to sell to the Electricity Generating Authority of

25 Thailand under the Non-Firm Power Purchase Agreement of 90 MW by the first quarter of All Non-Firm PPAs will have an additional rate (adder) from the normal rate, which is an additional of 3.50 baht per unit for duration of 7 years. Shareholders of TPIPP as of 29 June 2015 Name No. of shares % Leophairatana Group 1. TPI Polene Public Company Limited 1/ 58,999, Mr. Prachai Leophairatana Mr. Prateep Leophairatana Mr. Pramual Leophairatana Mr. Prayat Leophairatana Mrs. Orapin Leophairatana Total shares of Leophairatana Group 58,999, Mr. Mungkorn Kriengwattana Note : 1/ Majorly held by Leophairatana Group The Board of Directors of TPIPP as of 4 March 2016 Name Position 1. Mr. Prachai Leophairatana Chairman of the Board 2. Mr. Prateep Leophairatana Vice Chairman 3. Dr. Pramual Leophairatana Vice Chairman 4. Mrs. Orapin Leophairatana Vice Chairman 5. Mr. Prayat Leophairatana Director 6. Mr. Pakorn Leophairatana Director 7. Ms. Pattaraphan Leophairatana Director 8. Mr. Pakapol Leophairatana Director 9. Mrs. Nitawan Leophairatana Director 10. Mr. Manu Leophairatana Director 11. Mr. Thiraphong Vikitset Director 12. Mr. Apichai Chantarasean Director 13. Mr. Khantachai Vichakkhana Director 14. Ms. Malinee Leophairatana Director 15. Mr. Vanchai Manosutthi Director (Please see additional details in the summary of information of TPI Polene Power Company Limited and the management discussion and analysis of the company s financial position and performance for the year 2013, 2014 and 2015 in section 3 Fair value of the disposed asset in the attachment and in the Company s information memorandum.)

26 2.1.3 Information of TPI Polene Public Company Limited Company Name TPI Polene Public Company Limited Symbol TPIPL Business Type The Company and TPI Polene Group manufacture and supply cement, clinker, ready-mixed cement, concrete tiles, fiber cement, Lightweight Concrete and paint. Also, the Company is the manufacturer and distributor of LDPE Homopolymer (LDPE) and LDPE Copolymer (EVA) plastic resin, VAE Copolymer Emulsion, VAE Copolymer Redispersible Powder, Polene Solar film and conducts related business such as Ammonium Nitrate and Nitric Acid, Refuse Derived Fuel plants, Industrial Waste Disposal plants, Fertilizer Plant, Oil Service Stations and NGV gas stations, TPIPL Drinking Water Business, TPI Polene Liquid Soap and Life insurance business which is operated by the Company and the TPI Polene Group. Head Office 26/56 Chan Tat Mai Rd., Tungmahamek, Sathorn, Bangkok Location Telephone , Facsimile , Website Registered Capital 24,815 million baht Number of 20,190 million shares Common Shares Paid-up Capital 20,190 million baht

27 The Company s Business Overview of the Company s Business TPI Polene Group conducts business aiming to add on innovation by making the best use of resources, making TPI Polene Group to be the leader in Asia who is able to produce electricity from RDF from waste which is a renewable energy which is good for the environment. Also, the Company is the leader in the cement industry as well as LDPE Homopolymer (LDPE) and LDPE Copolymer (EVA) plastic resin and Ready-Mixed Concrete. TPI Polene Group harmonizes business growth, care for the environment and a creating a strong Thai society to become a part of the economic growth and the Thai society. 1. Cement, Clinker and Mortar Cement Business 2. LDPE/EVA plastic resins 3. Ready-mixed Concrete 4. Concrete Roof Tile and Fiber Cement Businesses 5. Light weight Concrete 6. Refuse Derived Fuel ( RDF ) Plant 7. Power Plants 8. Industrial Waste Disposal Business 9. Pyrolysis Plant 10. Oil Service Stations and NGV gas stations 11. Fertilizer Plant 12. Ammonium Nitrate and Nitric Acid 13. TPIPL Drinking Water Business 14. Polene Solar Products and VAE Copolymer Emulsion and Redispersible Powder 15. Petroleum Exploration and Production Technology (Please see more details in the information of TPI Polene Public Company Limited in the attachment and the Company s information memorandum.)

28 Summary of the financial position and financial performance of TPIPL for the years ending 31 December 2013, 2014 and Summary of the financial position (Consolidated) For the year ending 31 December Statement of financial position 2013* baht % 000 baht % 000 baht % Current assets 12,601, ,514, ,953, Property, plant and equipment 67,011, ,368, ,847, Other non-current assets ** 2,798, ,048, ,844, Total assets 82,411, ,931, ,645, Current liabilities 9,923, ,117, ,670, Long-term loans from financial institutions 3,690, ,662, ,504, Other non-current liabilities *** 11,084, ,365, ,504, Total liabilities 24,698, ,146, ,679, Equity Share capital: 24,815, ,815, ,815, Issued and paid-up share capital 20,190, ,190, ,190, Treasury shares held by subsidiaries (359,235) (0.44) (359,235) (0.36) (359,235) (0.33) Shares premium 60, , , Retained earnings 14,990, ,696, ,527, Other components of equity 22,830, ,181, ,538, Non-controlling interests , , Total equity 57,713, ,784, ,965, Total liabilities and equity 82,411, ,931, ,645, Note * Consolidated (before adjustments) ** Other non-current assets consist of Long-term investments in related parties, Other long-term investments, Investment properties, Land leasehold rights, Intangible assets, Deferred tax assets, Advances payment for plant and equipment and Other non-current assets. * * * Other non-current liabilities consist of Debentures, Finance lease liabilities, Deferred tax liabilities, Employee benefit obligations and Other non-current liabilities. The financial statements of TPI Polene Power Company Limited ending 31 December of 2013, 2014 and 2015 were audited by KPMG Phoomchai Audit Limited

29 Summary of the financial performance (Consolidated) For the year ending 31 December Statement of financial performance 2013* baht % 000 baht % 000 baht % Income - Revenue from sale of goods 26,872, ,504, ,135, Transportation income 1,441, ,223, ,245, Reversal of provision for fine , Net foreign exchange gain , , Other income 546, , , Total income 28,860, ,199, ,247, Expenses - Cost of sales of goods 22,866, ,004, ,894, Selling expenses 3,307, ,456, ,680, Administrative expenses 1,249, ,598, ,400, Finance costs 251, , ,018, Fines and additional tax expense 255, Net foreign exchange loss 167, Loss from investments Other expenses Total expenses 28,097, ,519, ,993, Note * Consolidated (before adjustments) For the year ending 31 December Statement of financial performance 2013* baht % 000 baht % 000 baht % Share of profit of investments in associates and joint venture 2, , , Profit (loss) before income tax expense 765, ,736, , Income tax (expense) income (159,214) (0.59) (372,891) (1.31) 67, Profit (loss) for the year 606, ,363, , Total comprehensive income (loss) for the (1,099,199) (4.09) year (53,789) (0.19) (1,411,571) (5.20) Operating profit ** 1,188, , , Note * Consolidated (before adjustments) ** Operating profit does not include gain/loss from exchange rates, loss from investment, fines and additional tax expense and tax)

30 Analysis of the Company s performance Unit 2013** Gross profit (%) Net profit (%) Registered and paid up capital (m.baht) 20,190 20,190 20,190 Par value per share (baht) Book value per share (baht) Earnings per share (baht) Dividends per share (baht) Dividend payout ratio * (%) Debt to equity ratio (times) Interest bearing debt to equity ratio (times) Note : * Calculated using the Company s separate financial statements ** Consolidated (before adjustments) (Please see additional details in the summary of information of TPI Polene Public Company Limited and the management discussion and analysis of the company s financial position and performance for the year 2013, 2014 and 2015 in the attachment and in the Company s information memorandum.)

31 2.1.4 Business structure before and after the transaction Current shareholding structure of the Company and group of companies as of 31 December 2016 TPI Polene Public Company Limited (Manufacture and distribute Cement Ready-mixed Concrete LDPE/EVA plastic resins / Industrial Waste Disposal / Liquid fuel / Concrete tiles / Fiber cement / Light weight Concrete / Drinking Water) 99.99% 99.97% Construction Industry Petrochemical Industry อ Agriculture and other อ ต industries ต ส 99.99% ส TPI Concrete Co.,Ltd. TPI All Seasons Co., Ltd. า 99.99% Thai Propoxide Co., าLtd. (Ready-mixed Concrete) (Plastic products / Polene Solar ห (Not in operation) ห and VAE glue) ก ก 50.00% Thai Nitrate Co., Ltd % Bangkok Union Life Insurance ร Public Co., Ltd. (Life Insurance) ร (Ammonia and nitric acid) ** ร ร 48.96% ม Mondo Thai Co., Ltd. ม 29.53% 28.75% ว (Real estate) ป Thai Special Steel Industry PCL ส โ United Grain Industry Co., Ltd. (Steel)* ด ต 19.00% (Packaging) ก ร อ 0.65% Pornchai Enterprises Co., เ Ltd. ส (Real estate development) TPI Intertrade Co., Ltd. ค (overseas investment) ร ม 99.94% TPI Commercial Co., Ltd. า (Group s retail business) ง % 99.99% 99.99% 51.00% 99.80% TPI Polene Bio Organics Co., Ltd. (humic and grow organic fertilizer, pyroligneous acid) Polene Plastic Co., Ltd (Export cement and plastic resins) TPI Service Co., Ltd. (Former name Jade Mineral Co.,Ltd.) (Construction) Energy Industry อ ต ส า TPI Polene Power Co., Ltd. (electricity and related products ห / % oil and stations) ก ร ร ม ก า ร เ ก ษ ต ร แ ล ะ อ น ๆ TPI Power Co., Ltd. (overseas investment) TPI Refinery (1997) Co., Ltd. (Petroleum exploration) Note : * Currently already reached an agreement between the creditor and debtor and is in process of approval from related courts. ** Holds 50% by the Company according to the name of shareholders % of Thai Nitrate Co., Ltd. (BOJ 5) at the Department of Business Development, Ministry of Commerce %

32 Shareholding structure after IPO TPI Polene Public Company Limited (Manufacture and distribute Cement Ready-mixed Concrete LDPE/EVA plastic resins / Industrial Waste Disposal / Liquid fuel / Concrete tiles / Fiber cement / Light weight Concrete / Drinking Water) 99.99% 99.97% Construction Industry Petrochemical Industry อ Agriculture and other อ ต industries ต ส 99.99% ส TPI Concrete Co.,Ltd. TPI All Seasons Co., Ltd. า 99.99% Thai Propoxide Co., าLtd. (Ready-mixed Concrete) (Plastic products / Polene Solar ห (Not in operation) ห and VAE glue) ก ก 50.00% Thai Nitrate Co., Ltd % Bangkok Union Life Insurance ร Public Co., Ltd. (Life Insurance) ร (Ammonia and nitric acid) ** ร ร 48.96% ม Mondo Thai Co., Ltd. ม 29.53% 28.75% ว (Real estate) ป Thai Special Steel Industry PCL ส โ United Grain Industry Co., Ltd. (Steel)* ด ต 19.00% (Packaging) ก ร อ 0.65% Pornchai Enterprises Co., เ Ltd. ส (Real estate development) TPI Intertrade Co., Ltd. ค (overseas investment) ร ม 99.94% TPI Commercial Co., Ltd. า (Group s retail business) ง % 99.99% 99.99% 51.00% 99.80% % TPI Polene Bio Organics Co., Ltd. (humic and grow organic fertilizer, pyroligneous acid) Polene Plastic Co., Ltd (Export cement and plastic resins) TPI Service Co., Ltd. (Former name Jade Mineral Co.,Ltd.) (Construction) Energy Industry อ ต ส า TPI Polene Power Co., Ltd. (electricity and related products ห / >70 % oil and stations) ก ร <30% ร General Public ม ก า ร เ ก ษ ต ร แ ล ะ อ น ๆ TPI Power Co., Ltd. (overseas investment) TPI Refinery (1997) Co., Ltd. (Petroleum exploration) Note : * Currently already reached an agreement between the creditor % and debtor and is in process of approval from related courts. ** Holds 50% by the Company according to the name of shareholders of Thai Nitrate Co., Ltd. (BOJ 5) at the Department of Business Development, Ministry of Commerce

33 Shareholders of TPIPP by the Company and other shareholders before and after the IPO in case the IPO is 30%, for comparison as follow: Name As of 29 June 2015 Before IPO No. of shares % No. of shares After IPO in case amount is 30% % Leophairatana Group 1. TPI Polene Public Company Limited 1/ 58,999, ,999, Mr. Prachai Leophairatana Mr. Prateep Leophairatana Mr. Pramual Leophairatana Mr. Prayat Leophairatana Mrs. Orapin Leophairatana Total shares of Leophairatana Group 58,999, ,999, Mr. Mungkorn Kriengwattana Total shares of the current shareholders of TPIPP 59,000, ,000, Shareholders from IPO (Estimated using 30%) ,285, Total 59,000, ,285, Note: 1/ Majorly held by Leophairatana Group The Board of Directors meeting of TPI Polene Public Company Limited ( the Company ) No. 2/2559 held on 4 March 2016, resolved to approve the plan to offer new shares of TPI Polene Power Company Limited ( TPIPP ) through an Initial Public Offering (IPO) and list the shares of TPIPP on the Stock Exchange of Thailand ( SET ) in which the amount of IPO shares shall not exceed 30% of the registered and paid up shares after the IPO. The Board of Directors approved to propose the matter to the Shareholder s meeting to consider approving the plan. After TPIPP has the approval of the Securities and Exchange Commission to do the IPO and the Stock Exchange of Thailand approves the listing of shares in the SET, the Company s holding proportion in TPIPP will decrease from 99.99% to no less than 70.00% of the total paid up shares after IPO in the case that the IPO amount is 30%

34 2.1.5 Estimated IPO process schedule Process schedule of the Company (TPIPL) Process Date The Board of Directors approves the plan to offer new shares of TPI Polene Power 4 March 2016 Company Limited through an Initial Public Offering (IPO) and list the shares of TPIPP on the Stock Exchange of Thailand. Record date to determine the name of shareholders who can attend the AGM of March 2016 Book close date to determine the name of shareholders who can attend the AGM of March 2016 pursuant to clause 225 of the Securities and Exchange Act B.E AGM of April 2016 Process schedule of TPIPP Process Date The Board of Directors approve the financial statements for the year 2015, approve the 4 March 2016 management structure of TPIPP, appoint committees, appoint underwriter to assist in the offering of the IPO and other related matters of listing the shares on the SET. AGM of April 2016 EGM No. 1/ April 2016 Submit for approval to IPO to the SEC In June 2016 Submit for approval to list shares of TPIPP in the SET TPIPP IPO after receiving approval from the SEC and the SET accepts TPIPP s shares About quarter 4 of 2016 to be a listed security in the SET Estimated first trading day of TPIPP s shares (if the preceding process are able to About quarter 4 of 2016 fulfill according to schedule) Note Schedules are subject to change, depending on the approval from TPIPL s shareholders meeting of 2016 as well as TPIPP s qualifications according to the conditions of the SET and SEC and opinions of other advisors including auditors and internal audit

35 2.2 Benefits of the Transaction To the Company 1) The Company will be able to decrease investment burden and/or additional financial support to TPIPP since TPIPP will be able to expand its business by raising funds through the SET and/or the capital market such as issuing stocks, bonds to the public or as private placements in which TPIPP s shares will have liquidity since it is traded on the SET. 2) The Company will divide the business structure to be more clear which will allow clarity and flexibility in the management, development, and investment in the electricity production and distribution and related products including natural gas and fuel stations. 3) When TPIPP becomes a listed company in the SET, the investment value in TPIPP of the Company will reflect the market price by having the share market price in the SET as reference, allowing the Company s share price to reflect a more accurate value of the subsidiary or TPIPP. 4) When TPIPP becomes a listed company in the SET, the Company will be able to sell the common shares of TPIPP in the SET in the future and receive gain (or loss) from the difference between the share price in the SET and the book value of TPIPP in the Company s account. However, the shares of TPIPP once listed in the SET will have liquidity and have a reference market price for future buy or sell decisions. 5) After the transaction by conducting a Spin-Off of TPIPP through the plan to IPO the new shares of TPIPP and list TPIPP s shares in the SET, the Company will have a subsidiary that has financial stability, which has the ability to raise its own funds and reflect the intrinsic value of the investment in TPIPP back to the Company. Benefits to TPIPP 1) Through IPO, TPIPP (the Company s subsidiary), will receive funds from the IPO to invest in its business expansion in future power plant projects. Also, the TPIPP will have working capital to support financial flexibility and liquidity. 2) By listing on the SET, TPIPP will gain benefit from being a listed company in terms of direct capital raising without needing to depend on the Company and the increase in fund raising channels, whether through equity and debt instruments to a much larger pool of investors who are interested in investing in the energy business and/or investment in debentures of an energy business. Also, when TPIPP is able to raise funds on its own, it will decrease the funds dependency on the parent company and/or loans from banks. Having various types and channels to raise funds will increase potential in accessing funds and allow TPIPP to grow and expand its business in the future. 3) When TPIPP becomes a listed company in the SET, TPIPP will have increase transparency through disclosure and be analyzed by analysts both in the country and other countries which will promote TPIPP to be more well known, improve company image and TPIPP will be more accepted by banks, trade partners, customers and trade creditors by being able to access disclosed information from various sources in the future. 4) After the IPO, TPIPP will have a much stronger financial structure with decrease debt to equity ratio and TPIPP will be able to raise funds on its own through the SET to expand business in the future. Benefits to the Company s shareholders 1) To be as an alternative investment for its shareholders, in which they could choose to investment in the Company and/or TPIPP according to each individual s investment interests. 2) To recognize an enterprise true value, whereas the value of shares in which the Company invested in TPIPP will be able to be compared with the market price of TPIPP when traded in the SET and may indirectly increase value of TPIPP which will benefit the shareholders of the Company. Therefore, the Company s share price will better reflect the value of this subsidiary or TPIPP by having a reference market price. 3) To enhance an opportunity to increase value of the Company in the future. After TPIPP who is a 70% owned subsidiary of the Company is able to achieved IPO, TPIPP would have a much stronger financial structure, i.e. lower debt to equity ratio and TPIPP would be able to raise funds on its own through the SET to expand business in the future

36 2.3 Cons of the transaction Effects on the Company 1) The IPO will decrease the Company s holding proportion in TPIPP from 99.99% to no less than 70.00% creating Earning Dilution and Controlling Dilution of no more than 30% calculated from 1 (Q 0 / (Q 0 + Q 1 )) where Q 0 = 59,000,000 shares (amount of TPIPP s shares as of 31/12/16) and Q 1 = 25,000,000 shares (estimated IPO shares) which will equal to 29.76% or no more than 30%. Therefore, the decrease in shareholding proportion in TPIPP in the short term might affect the Company s performance in which the total performance from TPIPP will decrease in proportion from 99.99% to no less than 70.00% (earning dilution) after the IPO. However, after the IPO in which TPIPP has the objective to use the IPO proceeds to expand its business as relieve debt obligations. Therefore, TPIPP s performance will improve in the future. 2) Since the Company and TPIPP are conducting related business which are connected with each other by having a Power Purchase Agreement with each other. However, TPIPP will operate without creating conflict of interest that will affect the gain or loss of benefit in either party and/or will operate the businesses with transparency in connected transactions such as using the market price or the appropriate price in normal business practices as if with other non-related parties (arm s length transaction) that will be beneficial, fair and reasonable for the transaction for both companies. Hence, in future connected transactions, the Company will comply with the connected transactions procedures which require more operational processes and take more time such as transactions that have a large transaction size will need to be approved from the Company s shareholders etc. Effects on TPIPP 1) By listing on the SET, TPIPP will have increase transparency through disclosure. TPIPP is obliged to disclose necessary information to the public which some information may be beneficial to TPIPP s competitors. 2) Since the Company and TPIPP are conducting related business which are connected with each other by having a Power Purchase Agreement with each other. However, TPIPP will operate without creating conflict of interest that will affect the gain or loss of benefit in either party and/or will operate the businesses with transparency in connected transactions such as using the market price or the appropriate price in normal business practices as if with other non-related parties (arm s length transaction) that will be beneficial, fair and reasonable for the transaction for both companies. Hence, in future connected transactions, the Company will comply with the connected transactions procedures which require more operational processes and take more time such as transactions that have a large transaction size will need to be approved from the Company s shareholders etc. Effects on the shareholders of the Company 1) The IPO will decrease the Company s holding proportion in TPIPP from 99.99% to no less than 70.00% creating Earning Dilution and Controlling Dilution of no more than 30% calculated from 1 (Q0 / (Q0 + Q1)) where Q0 = 59,000,000 shares (amount of TPIPP s shares as of 31/12/16) and Q1 = 25,000,000 shares (estimated IPO shares) which will equal to 29.76% or no more than 30%. Therefore, the Company s shareholders will be indirectly affected from the dilution in the holding of TPIPP s shares through the Company (see opinions of the Independent Financial Advisor in 2.5 Pre-emptive rights)

37 Analysis of effects from the Spin-Off to the Company regarding Earnings dilution Assumptions of the analysis 1. 3 years historical financial information of the Company using total revenue and net profit from the Company s consolidated financial statements without making any adjustments. The figures are used for analysis and comparison in the big picture only years historical financial information of TPIPP using total revenue and net profit from the Company s consolidated financial statements without making any adjustments. The figures are used for analysis and comparison in the big picture only (except for the net profit of TPIPP in 2015 which was adjusted by adding back loss from sale of investment in a subsidiary from the business restructuring). Key factors for the assumptions of the analysis 1. A past performance is not the only indicators of future performances. 2. TPIPP is in the process of business expansion. Therefore the 3 year historical financial information may not reflect future performances. (unit : million baht) Comparison of total revenue TPIPL 28, , , TPIPP 2, , , Proportionate comparison of TPIPP/TPIPL 7.50% 6.90% 9.56% 70% 5.25% 4.83% 6.69% 30% 2.25% 2.07% 2.87% Effect on revenue of TPIPL to decrease % of effect on the total revenue of TPIPL 2.25% 2.07% 2.87% (unit : million baht) Adjusted* Comparison of net profit TPIPL , TPIPP , ^ Proportionate comparison of TPIPP/TPIPL 54.36% 27.80% % % 70% 38.05% 19.46% 94.92% % 30% 16.31% 8.34% 40.68% 84.18% Effect on net profit of TPIPL to decrease % of effect on the net profit of TPIPL 16.31% 8.34% 40.68% 84.18% Note * In 2015, the net profit of TPIPP in 2015 which was adjusted by adding back loss from sale of investment in a subsidiary amounting to million baht. From the above table, comparing total revenue of TPIPP and TPIPL, the dilution is only 30%. As for accounting effects to the Company s consolidated financial statements, the Company will still book total revenue of both companies (including other subsidiaries) as well as cost of sales and expenses. The net profit will be classified as net profit of the parent company and non-controlling interest (net profit of the parent company equals total net profit deducted by net profit of non-controlling interest)

38 Opinion of the Independent Financial Advisor on the earnings dilution IFA opines that since the business of production and distribution of electricity of TPIPP is in the process of business expansion from the investment in power plants of TPIPP and the business of manufacturing and supplying cement, readymixed cement and plastic resins of TPIPL is in a recession state as the economy and Thailand s construction industry. Although the Spin-Off will create earning dilution to the Company, but with the revenue and profit of TPIPP is expected to grow in 2016 and 2017 at no less than 30% per year from Therefore, by holding shares of TPIPP in the proportion of 99.99% decreasing to 70.00% in which the business is a business that will grow at no less than 30%, the profit received despite the decrease in share proportion will not decrease. Also, TPIPP s IPO uses the book building method with institutional investors both domestically and internationally will enable the company to sell its shares at an appropriate price. The proceeds from the IPO will go to TPIPP and will increase equity value in the same proportion. Moreover, TPIPP plans to mainly use the proceeds to expand its business for business growth and financial stability. IFA opines that, although the Company will be affected by the dilution of earnings, from the decrease in shareholding proportion in TPIPP in the short term, however, after that the Company is expected to get better returns from the investment in TPIPP in the future. Risk Factors 1) Risk in conducting an IPO depends on the approval of the Securities and Exchange Commission and the application to list shares in the Stock Exchange of Thailand depends on the approval in the listing of shares and/or approval from related government agencies as well as TPIPP s readiness in transparency, internal control and audit standards and including readiness in disclosing information according to the rules and regulations of the SET and other related laws. 2) Risk from the success in the IPO regarding the appropriate price and amount of funds rising, which is dependent on the investment situation in the stock exchange, the country s economy and other related factors. 3) Risk from receiving approval from the shareholders of the Company and TPIPP and other related transactions in which key transactions must receive votes of no less than ¾ of the shareholders who attend the meeting and has the right to vote. However, since the Company holds 99.99% shares of TPIPP, there is no risk in this part

39 2.5 Pre-emptive Right The Company has informed the Independent Financial Advisor regarding the Pre-emptive Right at no more than 5.00% of the IPO shares of TPIPP. Opinions of the Independent Financial Advisor As for the Pre-emptive Right which is no more than 5.00% of TPIPP s IPO shares, by needing to increase capital to conduct the IPO, the proportion held in TPIPP of the Company will decrease from 99.99% to no less than 70.00% (Dilution Effect) will affect the shareholders of the Company to have a decrease in shareholding proportion in TPIPP of no less than 30%, the dilution affect is more than the pre-emptive right which is no more than 5.00% of the IPO of TPIPP (or no more than 1.5% of total shares of TPIPP after IPO). However, the shareholders may buy additional IPO shares of TPIPP as appropriate in the future

40 2.6 Other factors Conflict of interests in the case of a Spin-off Connected transactions between TPIPP and TPIPL and other companies in the group in 2014 and 2015 are summarized as follow: (Unit: million baht) Connected parties Transactions that TPIPP is the payer 1. Heat TPIPP buys heat from TPIPL Office rent TPIPP rents the office from Pornchai Enterprise Co., Ltd Land rent TPIPP rent land from TPIPL TPIPP rent land from United Grain Industry Co., Ltd TPIPP rent land from Thanapornchai Co., Ltd TPIPP rent land from Saraburi Ginning Mill Co., Ltd TPIPP rent land from Leophairatana Enterprise Co., Ltd Electricity TPIPP buys electricity from TPIPL to use in RDF power plants due to the close location to TPIPL (far from power plants of TPIPP) 5. Oil TPIPP buys oil from TPIPL only in Saraburi stations Plastic and rubber TPIPP buys plastic and rubber TPIPL Small rubber pieces TPIPP sells small rubber pieces to TPIPL to use in the oil production at the Pyrolysis Plant of TPIPL (TPIPP has a rubber factory but TPIPL does not) Total amount paid by TPIPP Transactions that TPIPP is the payee 1. Electricity TPIPP sells electricity to TPIPL RDF TPIPP sells RDF to TPIPL Oil and NGV gas TPIPP sells oil and NGV gas at gas stations to TPIPL TPIPP sells oil and NGV gas at gas stations to TPI Concrete Co., Ltd TPIPP sells oil and NGV gas at gas stations to TPI Polene Bio Organics Co., Ltd Organic Material TPIPP sells Organic Materials to TPI Polene Bio Organics Co., Ltd Insurance TPIPP buys Insurance from Bangkok Union Insurance Public Co., Ltd Total amount received by TPIPP 1, Note: Comparing transactions paid by TPIPP of million baht and cost of sales of 1, million baht, it will amount to 14.4% in 2014 and decreasing to those paid by TPIPP of million baht and cost of sales of 1, million baht, it will amount to 11.3% in And when comparing transactions paid to TPIPP in the amount of 1, million baht and sales revenue of 1, million baht it will amount to 53.6 whereas in 2015 that TPIPP was paid million baht and sales revenue of 2, million baht it will amount to 229% which decreased from the fact that TPIPP sells electricity to EGAT in an increasing proportion

41 Connected transactions in 2015 resulting from the business restructuring (unit : 000 baht( For the year ending 31 December (Unit : 000 baht) 2015 Connected transactions between TPIPP and the Company or TPIPL Sale of investment in a subsidiary to the Company 1,474, Connected transactions between TPIPP and TPI Refinery (1997) Company Limited, the Company s subsidiary Sale of assets used for petroleum exploration * 1,208, Sale of assets used for petroleum exploration * On 23 December 2015, TPIPP sold of assets used for petroleum exploration to TPI Refinery (1997) Company Limited with price according to the book value of 1,209 million baht. Outstanding accounts with connected parties of TPIPP as of 31 December are as follow: (Unit: 000 baht( For the year ending 31 December (Unit : 000 baht) Assets Accounts receivable related parties * 1,443,775 1,389,664 Loans to TPI Polene Bio Organics Co., Ltd. 723,026 - Liabilities Loans from the Company 231,000 1,635,021 Payables and advance payment from the Company 1,166, ,120 Accounts payable related parties ** 30,824 13,101 * Most receivables are of TPI Polene Bio Organics Co., Ltd. in the amount of 1, million baht and 1, million baht in 2014 and 2015 accordingly ** Most payables are of the Company in the amount of million baht and million baht in 2014 and 2015 accordingly See details of key contracts with related parties of TPIPP in the attachment. Opinion of the Independent Financial Advisor Since the Company and TPIPP are conducting related businesses which are connected with each other by buying and selling waste heat and electricity of TPIPP and the Company and having a Power Purchase Agreement with each other. However, TPIPP will operate without creating conflict of interest that will affect the gain or loss of benefit in either party and/or will operate the businesses with transparency in connected transactions such as using the market price or the appropriate price in normal business practices as if with other non-related parties (arm s length transaction) that will be beneficial, fair and reasonable for the transaction for both companies

42 2.7 Plans on the usage of IPO proceedings TPIPP plans to use the IPO proceedings for: 1) Business expansion in the future 2) Relieve financial debt to TPIPL and/or 3) Use as working capital of TPIPP However, it will depend on the amount of funds received from the IPO, which relies on the amount of IPO shares and the offer price of the IPO shares to the general public at that time. Opinion of the Independent Financial Advisor The Independent Financial Advisor opines that the plan to use the IPO proceedings of TPIPP is reasonable in the business operations and expansion of TPIPP s power plant projects in the future which requires massive investments. Also, the proceeds can be used to relieve debt obligations and/or working capital to increase financial flexibility and support TPIPP s liquidity for future business growth. The plan to expand TPIPP s power plant business requires investments of approximately 10,000 12,000 million baht in the next 1 3 years. TPIPP also has plans to repay loans to the Company (as of 31 December 2015, TPIPP has loans from the Company of 1,635 million baht) resulting in the Company receiving repayment from TPIPP in part or in whole and will reduce financial dependency from the Company in the long term. However, the exact proportion of money that TPIPP will use in each part 1) Business expansion in the future 2) Relieve financial debt (to TPIPL, banks etc.) and/or 3) Use as working capital of TPIPP, will depend on the amount of funds received from the IPO, which relies on the amount of IPO shares and the offer price of the IPO shares to the general public at that time. Nonetheless, the IPO of TPIPP and the listing of TPIPP s shares on the SET depends on the approval of the Securities and Exchange Commission and the application to list shares in the Stock Exchange of Thailand and/or approval from related government agencies as well as the success of the offering of shares to the general public. The Company will not sell current shares held in TPIPP to the general public, therefore, the Company will not directly receive any money from the general public but TPIPP may repay the Company s loan according to the stated plan for use of IPO proceeds

43 3. Valuation and conditions of the transaction 3.1 Fair value of the disposed asset In the valuation of the asset, IFA has considered information gathered from management interviews, company forecasts of the Company and TPIPP including other public information. However, this report is prepared by IFA based on the key assumption that information, assumptions and documents obtained from the Company are reliable, accurate and complete. Also, the report is based on analysis of the known current conditions. If there is any material changes, as it may have a significant impact on the valuation of the assets and the shareholders decision. In evaluating the fair value of the transaction, IFA has applied 5 approaches; 1. Book Value Approach 2. Adjusted Book Value Approach 3. Historical Market Price Approach 4. Price to Book Value Ratio Approach or P/BV Ratio 5. Discounted Cashflow Approach Key points for the valuation of TPIPP s shares This transaction which is the divestment of assets of TPI Polene Public Company Limited ( The Company ) is considered as a divestment of asset transaction regarding the approval of the initial public offering (IPO) of the shares of TPI Polene Power Company Limited, the Company s subsidiary and the plan to list in the Stock Exchange of Thailand. Therefore the asset divestment will be in the form of TPIPP issuing and offering new shares to the public as an IPO. The IPO is expected to occur in quarter 4 of 2016, therefore the price of TPIPP s shares to be sold cannot yet be determined in the present. In stipulating the price, TPIPP will appoint an underwriter in which normal IPO processes will include the Book Building process (a method of surveying institutional investor s demand of a security) or other processes in order to set the offering price depending on the appropriateness of the fund raising value, market conditions and underwriter. Also, the offer price can be stipulated using other methods such as comparing performances with companies that operate similar businesses as TPIPP and/or valuating using Discounted Cashflow method etc. Determining the market price using the Book Building Approach for Market Demand Determining the market price using the Book Building Process is a method of determining the price by setting the price at the level that the shares are able to be sold or bought between willing buyers and sellers under normal market requirements that the sellers and buyers do not have conflict of interest and the offer is made for a appropriate duration. However, there are also other factors such as market conditions and the amount of money institutional investors and the general public will accept the offer. IFA opines that the method is appropriate because it is derived from the demand survey of institutional investors who have to analyzed the fundamentals of TPIPP as well as TPIPP s performances in the past and in the future, along with economic, money market, capital market conditions before making an investment decision. The offering by using the Book Building Process would have to pass the process of making the final decision about the price in which the Company and/or TPIPP, TPIPP s financial advisor and underwriter will make the final decision on the price together

44 IFA has no doubts in the offering of securities of TPIPP to the general public that the method of determining the price will enter the Book Building process or other methods depending on the appropriateness of the funds raised, market conditions, and underwriter. Also, the price may be derived by other methods such as by comparing the performances of TPIPP with other companies that have similar businesses as well as using the Discounted Cashflow method which will allow TPIPP to achieve an appropriate offer price that will be beneficial to TPIPP and the Company according to the market conditions at the offering period. However, the success of the IPO both in terms of price and amount of shares sold will depend on market conditions at that period in which the major factors are: 1. The offer covers institutional investors in a wide range both domestic and international or covers a variety of investor types such as various types of mutual funds, life and non-life insurance companies, banks etc. and has an appropriate number of institutional investors in the book building process with the appropriate time in conducting the book building. 2. Views on the potential of TPIPP s business operations and the investment of investors including the electricity production and distribution industry, Refused Derive Fuel or RDF plants as well as price of shares in the same industry. 3. Volatility of the market both domestic and international during the offer period etc. Therefore, the valuation of the shares of TPIPP by IFA is for the objective of providing the shareholders of the Company with additional information to make the decision of whether to approve or not approve the transaction, not with the objective to guide the price of IPO because there is a difference in time, stock market conditions, the certainness of the need for funds and future business plans of TPIPP which is under preparation by the Company, the financial advisor for the IPO, the underwriter and so on. Due to the timing of the valuation and the time in which the IPO is expected to be towards the end of year 2016, is significantly far apart, therefore, the market conditions, economy, operation performance of TPIPP, policies and future business plans will significantly affect the future share price of TPIPP. According to the agenda of the AGM for year 2016 of the Company in the approval of the divestment of asset transaction regarding TPI Polene Power Company Limited, the Company s subsidiary that seeks approval to offer new shares and list in the SET without approving the offer price of TPIPP s shares. Therefore, IFA has not compared the offer price with the fair value of TPIPP s shares in this valuation

45 Summary of the financial position and financial performance of TPI Polene Power Company Limited TPIPP Summary of the financial position and financial performance of TPIPP for the years ending 31 December 2013, 2014 and 2015 are as follow: 2015 are as follow: Unit : million baht Separate financial statements Revenue from sale of goods Other income Total income Cost of sales of goods Selling expenses Administrative expenses Loss from investments in associates Loss from change in fair value of available-for-sale investments Loss from net foreign exchange Gain from impairment of share value of the parent company Finance costs Income tax (expense) income Net Profit (loss) Total assets Total liabilities Shareholder s Equity Paid-up capital 2, , , , , , , , , , (18.06) , , , , , , , , , , , Summary of the financial position and financial performance of TPIPP and subsidiaries for the years ending 31 December 2013, 2014 and Consolidated financial statements of TPIPP and subsidiaries * Revenue from sale of goods Reversal of impairment of share value of the parent company Gain from foreign exchange Other income Total income Cost of sales of goods Selling expenses Administrative expenses Loss from net foreign exchange Gain from impairment of share value of the parent company Finance costs Income tax (expense) income Net Profit (loss) 11, , , (13.33) Note : * The financial statements of TPIPP and subsidiaries were made only for year 2015 compared with The financial statements of TPI Polene Power Company Limited ending 31 December of 2013, 2014 and 2015 were audited by KPMG Phoomchai Audit Limited. 9, , , ,

46 The restructuring of the TPI Polene Company Limited Group To be in line with the business expansion and the Company s business plan to IPO shares of TPIPP and list TPIPP s shares on the SET, the group therefore restructured the business structure of TPIPP as follow: TPI Polene Power Company Limited increased shares 2 times in the amount of 748,837,500 baht and 1,000,000,000 baht for a total paid up capital of 4,900,000,000 baht and 5,900,000,000 baht in June 2015 both times accordingly. TPI Polene Power Company Limited sold shares held in the Company amounting to 200,000,000 shares and 163,540 shares to TPI Concrete Company Limited at the market price in December 2015 and January 2016 respectively. TPI Polene Power Company Limited sold assets including rights, benefits and obligations related to the petroleum concession No. 2/2554/110 at the book value of 1, million baht to TPI Refinery (1997) Company Limited on 23 December whereas TPI Polene Power Company Limited will still be jointly liable with TPI Refinery (1997) Company Limited in acting according to the concession and Petroleum Act, B.E (1971). (E) Sale of investment in subsidiaries of TPIPP 1. TPI Polene Public Company Limited acquired 99.80% shares of TPI Polene Power Company Limited (Formerly TPI Petroleum Company Limited) from TPI Polene Power Company Limited at the book value amounting to an investment of 0.71 million baht on 5 August, (A) 2. TPI Polene Public Company Limited acquired 99,993 shares or 99.99% of Polene Plastic Company Limited from TPI Polene Power Company Limited at the book value amounting to an investment of million baht on 1 September (B) 3. TPI Polene Public Company Limited acquired 19,999,996 shares or 99.99% of TPI Polene Bio Organics Company Limited from TPI Polene Power Company Limited at the book value amounting to an investment of 1, million baht on 1 September (C) 4. TPI Polene Public Company Limited acquired 5,100 shares or 51.00% of TPI Service Company Limited from TPI Polene Power Company Limited at the book value amounting to an investment of 0.86 million baht on 1 September (D)

47 Current shareholding structure of the Company and group of companies as of 31 December 2016 after the restructuring of TPI Polene Power Company Limited s group TPI Polene Public Company Limited (Manufacture and distribute Cement Ready-mixed Concrete LDPE/EVA plastic resins / Industrial Waste Disposal / Liquid fuel / Concrete tiles / Fiber cement / Light weight Concrete / Drinking Water) 99.99% 99.97% Construction Industry Petrochemical Industry อ Agriculture and other อ ต industries ต ส 99.99% ส TPI Concrete Co.,Ltd. TPI All Seasons Co., Ltd. า 99.99% Thai Propoxide Co., าLtd. (Ready-mixed Concrete) (Plastic products / Polene Solar ห (Not in operation) ห and VAE glue) ก ก 50.00% Thai Nitrate Co., Ltd % Bangkok Union Life Insurance ร Public Co., Ltd. (Life Insurance) ร (Ammonia and nitric acid) ** ร ร 48.96% ม Mondo Thai Co., Ltd. ม 29.53% 28.75% ว (Real estate) ป Thai Special Steel Industry PCL ส โ United Grain Industry Co., Ltd. (Steel)* ด ต 19.00% (Packaging) ก ร อ 0.65% Pornchai Enterprises Co., เ Ltd. ส (Real estate development) TPI Intertrade Co., Ltd. ค (overseas investment) ร ม 99.94% TPI Commercial Co., Ltd. า (Group s retail business) ง % (C) (B) (D) 99.99% 99.99% 51.00% 99.80% TPI Polene Bio Organics Co., Ltd. (humic and grow organic fertilizer, pyroligneous acid) Polene Plastic Co., Ltd (Export cement and plastic resins) TPI Service Co., Ltd. (Former name Jade Mineral Co.,Ltd.) (Construction) (A) Energy Industry อ ต ส า TPI Polene Power Co., Ltd. (electricity and related products ห / % oil and stations) (A) (E) ก ร ร ม ก า ร เ ก ษ ต ร แ ล ะ อ น ๆ TPI Power Co., Ltd. (overseas investment) % Note : * Currently already reached an agreement between the creditor and debtor and is in process % of approval from related courts. ** Holds 50% by the Company according to the name of shareholders of Thai Nitrate Co., Ltd. (BOJ 5) at the Department of Business Development, Ministry of Commerce. (E) TPI Refinery (1997) Co., Ltd. (Petroleum exploration) Transferred rights, benefits and obligations related to the petroleum concession No. 2/2554/110

48 Details of the transaction : loss from sales of investment in the subsidiary of TPIPP Accounting bookings of Sales of investment in the subsidiary of TPIPP to TPIPL TPIPP No. 1 or (A) No. 2 or (B) No. 3 or (C) No. 4 or (D) TPI Power Polene Plastic TPI Polene Bio TPI Service Total Organics Number of shares 9, , ,999, , Sale price share (baht) , Sale value (million baht) , , Book price (million baht) , * , Gain (loss) (million baht) (0.27) (645.60) 0.35 (537.07) Note : In 2015, TPI Polene Bio Organics increased capital of 1,000 million baht to be 2,000 million baht Effects on the Company s future business structure Other than booking the accounting for investments of the Company in 2015 and the payment to acquire investments in various subsidiaries, there is no other direct effects on the Company s business structure because the sale of investment of TPIPP which is a subsidiary of the Company to the Company in No. 2 to No. 5 are transactions that TPIPP, the subsidiary sold investments to the Company so that the Company holds direct shares in those companies. Effects on TPIPP s future business structure Effects on TPIPP s business Sales of investment in the subsidiary of TPIPP to TPIPL No. 1 or (A) No. 2 or (B) No. 3 or (C) No. 4 or (D) (E) TPI Power Polene Plastic TPI Polene Bio Organics TPI Service Transferred rights, benefits and obligations related to the petroleum concession No. 2/2554/110 Not yet in operation Conducts plastic exporting business which is directly related to the Company. Therefore has no effect on TPIPP s business. Conducts organic fertilizer business in which the waste to RDF project, the extracted organic substances from waste is used as materials in the production of organic fertilizer. The Company s management expects the amounts to decline in the future because TPIPP will compose the organic substances into RDF for electricity production. Conducts construction business which is directly related to the Company. Therefore has no effect on TPIPP s business. Most investments used in the petroleum exploration in the past have been booked as assets of TPIPP in which the sale of assets (transfer of rights) at the book value of TPIPP and there has not yet been any revenue from the concession right in the past to present. The Company s management sees that there is high risk and the business is not directly related to TPIPP

49 Analysis of the performance of TPI Polene Power Company Limited for years 2013, 2014 and Revenue In 2013, 2014 and 2015, TPIPP has revenue of 2,117 million baht, 1,985 million baht and 2,629 million baht accordingly. The revenue increased in 2015 mainly due to increase in sale of electricity in which the revenue from sale of electricity accounts for 47.6%, 47.2%, and 62.7% of total revenue from sales. Moreover in 2013, 2014 and 2015 TPIPP revenue from oil and natural gas sales accounting for 41.7%, 44.7% and % of total revenue from sales and other sales accounting for %, 8.1 % and 4.7 % total revenue from sales accordingly. In 2015, revenue from sale of electricity increased due to the RDF plant of 20 MW and 60 MW has produced and sold electricity according to the PPA with EGAT of about 18 MW and 55 MW with an adder of 3.50 baht per unit from the normal sale price since January 2015 and August 2015 accordingly. The sales to EGAT accounts for 45.0% of total revenue from sales and the electricity sales with TPI Polene Public Company Limited accounts for 17.7% of total revenue from sales. As for special non-recurring items, in 2014 a reversal of loss from impairment of shares held by the Company in the amount of 117 million baht. As for 2015, the business restructuring caused a loss from sale of investment in a subsidiary to TPI Polene Public Company Limited in the amount of 2,795 million baht respectively. In 2013, 2014 and 2015, TPIPP has revenue of 2,165 million baht, 2,152 million baht and 2,795 million baht accordingly. Cost of sales Cost of sales of TPIPP in 2013, 2014 and 2015 is 1,660 million baht, 1,629 million baht and 1,624 million baht respectively which accounts for 78.4%, 82.1% and 61.8% of revenue from sales causing the gross profit of TPIPP to be 21.6%, 17.9% and 38.2% of revenue from sales respectively The gross profit in 2015 is higher than 2014 since the PPA with EGAT has an additional rate (adder) of 3.50 baht per unit from the normal rate. Selling and administrative expenses TPIPP has selling and administrative expenses in 2013, 2014 and 2015 of 119 million baht, 108 million baht and 102 million baht respectively, accounting for 5.6%, 5.4% and 3.9% of revenue from sales respectively. The selling and administrative expenses for 2015 accounted for a smaller proportion from revenue from sales due to the decrease in selling expenses while the sales revenue has significantly increased. Interest expense (Financial cost( TPIPP has interest expenses for 2013, 2014 and 2015 in the amount of 25 million baht, 9 million baht and 95 million baht respectively. In 2015, the interest expense increased due to TPIPP s increased debt obligations from borrowing loans from financial institutions and the Company to invest in 2 RDF power plants of 60 MW and 70 MW, Waste heat power plant of 30 MW and RDF compost plant etc. Net profit In 2013, 2014 and 2015, TPIPP has net profit of 329 million baht, 379 million baht and 493 million baht with net earnings per share of 8.11 baht, 9.25 baht and 9.66 baht accordingly. The net profit in 2015 increased as compared to 2014 due to the increase in revenue from sales and gross profit margin from the sale of electricity from the RDF power plant to EGAT with an adder of 3.50 baht per unit (deferred tax in the rate of 20% from the loss from sale of investments in a subsidiary). In 2015, TPIPP accounts loss from net exchange rate of 49 million baht and loss from sale of investments in a subsidiary of 537 million baht. In 2013, 2014 and 2015, TPIPP has net operating profit from normal operations (not including profit(loss) from net exchange rate, loss from investment in subsidiary and income tax) amounting to 357 million baht, 407 million baht and 974 million baht accordingly. The net operating profit from normal operations in 2015 increased since TPIPP has significant increase in sales revenue from the production and sale of electricity from the RDF power plant of 20 MW and 60 MW to EGAT with an adder of 3.50 baht per unit from the normal rate including increase in other revenues

50 Analysis of the financial position of TPI Polene Power Company Limited for the years 2013, 2014 and 2015 For the year ending 31 December baht % 000 baht % 000 baht % Assets Current assets Cash and cash equivalents 58, , , Short term investments Accounts receivables 1,324, ,454, ,678, Other receivables 7, , , Short term loans to related parties 639, , Receivables and advance payment to related 17, , , parties Inventory 405, , , Other current assets 8, , , Total current assets 2,462, ,716, ,273, Non-current assets Investment in subsidiaries 1,011, ,011, Long term investments 158, , , Investment property 41, , , Property, plant and equipment 4,090, ,069, ,282, Land leasehold rights 3, , , Advances payment for plant and equipment 107, , , Deferred tax assets 82, , , Shares of the parent company held for charity 216, , Other non-current liabilities 1, , Total non-current assets 5,713, ,583, ,399, Total assets 8,175, ,300, ,673, Liabilities and equity Liabilities Account payables 127, , , Other payables 95, , ,366, Short term loans from related parties 249, , Payables and advance payment from related 425, parties 728, ,166, Accrued tax - - 5, Current portion of Long-term bank loans , Other current liabilities 3, , , Total current liabilities 1,204, ,710, ,962, Non-current liabilities Long-term loans from financial institutions 611, ,751, Long-term loans from related parties ,635, Employee benefit obligations 31, , ,

51 For the year ending 31 December baht % 000 baht % 000 baht % Total non-current liabilities 642, ,774, ,666, Total liabilities 1,847, ,484, ,628, Equity Share capital: 4,900,000 4,900,000 5,900,000 Issued and paid-up share capital 4,060, ,151, ,900, Retained earnings 2,268, ,655, ,145, Other components of equity - - 8, Total equity 6,328, ,815, ,045, Total liabilities and equity 8,175, ,300, ,673, The financial statements of TPI Polene Power Company Limited ending 31 December of 2013, 2014 and 2015 were audited by KPMG Phoomchai Audit Limited. Assets As of 31 December 2013, 2014 and 2015 TPIPP has assets of 8,176 million baht, 12,300 million baht and 12,674 million baht accordingly. The increase in assets is mainly due to the investment in the RDF power plant project of 60 MW and 70 MW, Waste heat power plant of 30 MW and RDF compost plant. TPIPP has current assets as of 31 December 2013, 2014 and 2015 of 2,463 million baht, 2,717 million baht and 2,274 million baht accordingly. The current assets decreased due to the decrease in short term loans to related parties from 2014 in which short term loans to TPI Polene Bio Organics is million baht decreased to 0 in Also, the decrease in other current assets while cash and cash equivalents increased, short term investments increased, accounts receivables increased in which account receivables (other companies) in 2014 is million baht, in million baht increased million baht from EGAT which is a receivable and the account receivables in 2013, 2014 and 2015 accounts for 53.8%, 53.5% and 73.8% of current assets. Receivables from advanced payment to related parties increased 7.36 million baht from 2014 in the amount of 9.36 million baht to million baht in 2015 which is in the part of TPI Polene Public Company Limited 4.57 million baht and TPI Polene Bio Organics Company Limited 7.26 million baht. Inventory increased million baht (increased in the part of spare parts and supplies million baht, work in process million baht whereas finished goods decreased million baht and packaging and chemicals decreased 5.53 million baht). As of 31 December 2013, 2014 and 2015, TPIPP has investments in subsidiaries of 1,011 million baht, 1,001 million baht and 0 baht accordingly. The investment in subsidiaries are divided into Polene Plastic Company Limited 9.99 million baht, TPI Polene Bio Organics Company Limited 1,000 million baht, TPI Power Company Limited million baht, TPI Service Company Limited 0.51 million baht. After that in quarter 3 of 2015 TPIPP has restructured its business by selling all investments in a subsidiary. As of 31 December 2013, 2014 and 2015, TPIPP has Property, plant and equipment of 4,090 million baht, 8,069 million baht and 9,28 2 million baht accordingly. The increase in assets are from TPIPP s investments in various projects which are 2 RDF power plants of 60 MW and 70 MW, Waste heat power plant of 30 MW and RDF compost plant etc. Liabilities As of 31 December 2013, 2014 and 2015, TPIPP has total liabilities of 1,848 million baht, 5,484 million baht and 3,628 million baht accordingly. The increase in liabilities is from the loans to invest in projects mentioned above. As of 31 December 2013, 2014 and 2015, TPIPP has other payables of 95 million baht, 865 million baht and 1,366 million baht accordingly in which payables from purchasing machines increased in 2014 and 2015 due to the investment in

52 machines for various projects. Once the company receives the machines, the company will need to book payables with the value of the machines according to the invoice. The payment for the machines will be according to each machine s contract. Mostly, the outstanding payables are to be paid in the very last payment which needs to wait for the test run results and the signing to accept the machines or payment conditions to be proportionate of work completed. The payables for machines payment in 2014 and 2015 is 754 million baht and 1,243 million baht accordingly since it is in the process of investing in machines for the power plants. Others are accrued expenses, deposits, retentions etc. As of 31 December 2013, 2014 and 2015, TPIPP has Payables and advance payment from related parties of 729 million baht, 1,166 million baht and 425 million baht accordingly. In 2014 and 2015, decreased in the part of Polene Plastic Company Limited million baht. As of 31 December 2013, 2014 and 2015, TPIPP has Short term loans from related parties of 250 million baht, 231 million baht and 0 million baht accordingly. In and , decreased in the part of TPI Polene Public Company Limited million baht. As of 31 December 2013, 2014 and 2015, TPIPP has Long-term loans from financial institutions of 612 million baht, 3, million baht and 0 million baht accordingly. Presently, TPIPP has to outstanding loans from financial institutions since the company repaid all loans in 2015 from using loans of the Company (from sale of debentures in 2015) to repay the financial institutions. As of 31 December 2013, 2014 and 2015, TPIPP has Long-term loans from related parties of 0 million baht, 0 million baht and 1,635 million baht accordingly. The increase in 2015 is because the company borrowed from TPI Polene Public Company Limited in the amount of 1,635 million baht to use to repay financial institutions, details as stated above. Equity As of 31 December 2013, 2014 and 2015, TPIPP has equity of 6,328 million baht, 6,816 million baht and 9,045 million baht accordingly. The increase in 2015 is because the additional paid up shares which were formerly partially paid from TPI Polene Public Company Limited in the amount of 749 million baht and the share increase of 1,000 million baht including the net profit in Capital structure As of 31 December 2013, 2014 and 2015, TPIPP has debt to equity ratio of 0.29 times, 0.80 times and 0.40 times accordingly. The debt to equity ratio decreased as compared to the previous year due to the increase in registered and paid up capital along with the net profit as well as the repayment to financial institutions. Liquidity For years 2013, 2014 and 2015, TPIPP has operating Cashflow of 802 million baht, 777 million baht and 347 million baht accordingly. The decrease of operating Cashflow in 2015 is due to the decreased in payables and advance payment from related parties. The liabilities of TPIPP with Plastic Polene Company Limited decreased from 1,079 million baht in 2014 to 372 million baht in TPIPP has Cashflow from investments in years 2013, 2014 and 2015 in the amount of (1,100) million baht (3,214) million baht and (14 1) million baht accordingly since in 2014 and 2015, TPIPP purchased Property, plant and equipment and paid in advance for machines for the power plant construction. TPIPP has Cashflow from financing in years 2013, 2014 and 2015 in the amount of 315 million baht, 2,410 million baht and (123) million baht accordingly. In 2015, TPIPP had repaid loans from related parties and TPIPP has received cash from loans from related parties as well as cash from the additional paid up of shares. The fund inflow was used to repay long term loans from financial institutions resulting in the net Cashflow after financing activities for years 2013, 2014 and 2015 to be 17 million baht, (27) million baht and 82 million baht accordingly

53 Performance by business segment Energy and Utility Business In 2014 as compared to 2013, revenue from sales of electricity from Waste Heat decreased due to the decrease in amount of waste heat from the decreased production of cement plants. However in 2014, the electricity sale price per unit has slightly increased. In 2015 as compared to 2014, revenue from sale of electricity increased significantly or increased 76.0% because of the increase in volume and price of electricity which is due to the production and sale of electricity according to the PPA with to the Electricity Generating Authority of Thailand of the RDF plant of 20 MW and 60 MW with an adder of 3.50 baht per unit from the normal sale price since January 2015 and August 2015 accordingly. This resulted in the increase in margin. The revenue from waste heat electricity accounts for 28.3% and revenue from RDF electricity accounts of 71.7% of total electricity sales revenue. Oil Service Stations and NGV gas stations In 2014 as compared to 2013, the volume of oil sales decreased slightly in which the average selling price decreased along with the world oil price. Meanwhile, the volume of gas natural gas sales increased and the average selling price of natural gas also increased from the price adjustment in quarter 4. In 2015 as compares to 2014, the volume of oil sales increased 7.3% in which the average selling price decreased along with the world oil price. Meanwhile, the volume of gas natural gas sales decreased but the average selling price of natural gas increased from the price adjustment in The revenue structure of oil sales accounts for 51.2% and natural gas sales accounts for 48.8% of oil and natural gas sales. However, the margin of oil is quite small and volatile due to the small marketing margin and the volatile world oil price, whereas the margin of natural gas is quite stable. Other segments In 2014 as compared to 2013, other revenues decreased from the decrease in sale of fertilizer. Also, the sales volume of RDF to TPI Polene Public Company Limited has decreased. In 2015 as compared to 2014, other revenues decreased as well from the decrease in sale of fertilizer. Also in 2015, there were no sales of RDF to TPI Polene Public Company Limited because TPIPP need RDF to produce electricity through the RDF power plant

54 1) Book Value Approach This method considers the value of assets in which TPIPP will dispose that appears in the books at a period in time. This method of asset valuation considers the book value of assets in TPIPP s financial statements. The following is the valuation of TPIPP s assets according to TPIPP s financial statements as of 31 December (Unit: million baht) as of 31 December 2015 Registered and paid up capital Retained earnings (loss) and other components Total shareholders equity Common shares of TPIPP (shares( Par value (Baht per share) Book value per share (Baht per share) 5, million baht 3, million baht 9, million baht 59,000,000 shares 100 Baht per share Baht per share From the Book Value Approach, the book value of TPIPP according to the financial statements as of 31 December 2015 is approximately baht per share or total value of 9, million baht. Valuation using the Book Value Approach reflects financial status and the assets book value up to a period in time without reflecting the intrinsic value of the asset and potential for profit in the future. The Independent Financial Advisor opines that this method does not reflect the intrinsic value of TPIPP and does not reflect the potential for profit in the future. Therefore is not an appropriate method to use in the valuation of the shares of TPIPP. Note : The Board of Directors of TPIPP No on 25 March 2016 approved the payment of dividends from the performance of TPIPP at baht per share amounting to a total of 2,551,750,000 baht. The payment date will be 4 May IFA has adjusted the equity value of TPIPP for the dividends payment in the part of Adjusted Book Value Approach which is section 2 (Adjusted Book Value Approach)

55 2. Adjusted Book Value Approach This method of valuation uses asset value deducted with total liabilities of the company in a point in time, and adjusted for discounts or premiums of important transactions that affect the share price of TPIPP, and then divide by the total adjusted number of shares. For this method, the Independent Financial Advisor uses the book value of equity of TPIPP according to the financial statements as of 31 December which was audited by an approved auditor, and adjusted for discounts and premiums of the assets and/or liabilities in important transactions that will materially affect the book value of TPIPP as of 31 December 2015 significantly. Also, by using interview of the Company s management and related persons of TPIPP. The Independent Financial Advisor has opinions in the adjustments as of 31 December 2015 are as follow: 1) Adjustments of assets book value of TPIPP Details of the main assets (land) of TPIPP as of 31 December Items Area (Rai( Book value as of 31 December 2015 Land deed No million baht Additional information Since the land deed No must give rights of way for public use (Commute, electricity, water, phone lines, water pipes etc.) the price cannot be determined. Moreover TPIPP plans to sell this land to TPIPL at million baht equal to the book value. IFA therefore sets the fair value to equal the book value of TPIPP or million baht and not evaluate the value of the land using market prices from the states reasons. However, the appraised value of nearby land is 250,000 baht per rai or 625 baht per square wa, or million baht

56 Details of the main assets (machines) of TPIPP as of 31 December Type Item name Book value (M.Baht( Oil & Gas Station Accumulated depreciation (M.Baht) Net Book value (M.Baht) Depreciable years (years) Remaining years (years) Oil & Gas station Total Oil & Gas station RDF Plant RDF Plant 1-2 Tyre shredder (additional) Tyre shredder (MAIN) Tyre shredder (SUB) PRE-TREATMENT OF MSW #MAIN PRE-TREATMENT OF MSW #SUB RDF-PRODUCTION PLANT #MAIN RDF-PRODUCTION PLANT #SUB RDF-RECEIVING STORING,DOSING AND FEEDING STATION #MAIN RDF-RECEIVING STORING,DOSING AND FEEDING STATION #SUB LABORATORY EQUIPMENT #MAIN LABORATORY EQUIPMENT #SUB FIRE FIGHTING SYSTEM #MAIN FIRE FIGHTING SYSTEM #SUB RDF-PRODUCTION PLANT #MAIN RDF-PRODUCTION PLANT #SUB Total RDF Plant 1-2 1, Power plant Power Plant 1-2 (40 MW)-WHRP TURBINE 1 (2*20) TURBINE 2 (2*20) AQC BOILER SP BOILER WATER PIPE SYSTEM EXTENTION PA WATER PIPE SYSTEM EXTENTION PA Total Power Plant 1-2 1, Power plant Power Plant 3(20 MW)-WHRP POWER PLANT Line POWER PLANT Line FLUXER ALTERMATIVE FUEL BOILER PLANT ( 65 t/h) ALTERMATIVE FUEL BOILER PLANT (MAJOR) ( 65 t/h) ALTERMATIVE FUEL BOILER PLANT XRF ANALYZER BRUKER 38 TIGER ALTERMATIVE FUEL BOILER PLANT Total Power Plant

57 Power plant Power Plant 5 (60 MW)-RDF TURBINE 60W CFB BOILER 1 60 MW 1, , CFB BOILER 2 60 MW 1, , STEAM BOILER 150 T/H 60MW NEW RDF FOR POWER PLANT 60 MW ( RDF 3 ) NEW RDF FOR POWER PLANT 60 MW ( RDF 4 ) WATER TREATMENT AND WATER SUPPLY 60 MW HDPE PIPE TO POWER PLANT 60 MW TERMINAL SUB STATION (CONNECTION) 60 MW EXTENSION PHASAK RIVER STATION PUMP Total Power Plant 5 3, , Total all Power Plant 5, , Total value of machines 7, , , Since IFA opines that the Adjusted Book Value Approach does not reflect the intrinsic value of TPIPP by not reflecting the future ability to generate profit, the method is therefore not appropriate for the valuation of the shares of or of TPIPP. Also, as of the date of the report, the machines have not been appraised by an independent appraiser in which, most cases, the appraisers will use the Cost Approach which is close to the method of depreciation of the assets of TPIPP. Also the age of machines of power plants 3 and 5 are new with age of about 1-3 years and power plants 1 and 2 are about 7 years, RDF 3-5 years. Therefore, IFA opines that the total value of machines may not be different from the book value of TPIPP s assets and IFA does not choose the Adjusted Book Value Approach in determining the fair value of TPIPP s shares. However, IFA has informed the Company to appraise the assets of TPIPP to report to the AGM of 2016 for the approval of the divestment of asset transaction. 2) Adjustments of the book value regarding the payment of dividends of TPIPP The Board of Directors of TPIPP No on 25 March 2016 approved the payment of dividends from the performance of TPIPP at baht per share amounting to a total of 2,551,750,000 baht which accounts for of retained earnings as of 31 December 2015 of TPIPP. The payment date will be 4 May IFA opines to adjust the book value of TPIPP to decrease according to the dividends payment in the amount of 2, million baht

58 Summary of share value of TPIPP using the Adjusted Book Value Approach Shareholder s equity as of 31 December 2015 Adjustments for asset appraisal Adjustments for dividend payment Total Shareholder s equity after adjustments of assets value Number of shares of TPIPP (shares) Par value (baht per share) Book value per share after adjustments of assets value (baht per share) (Unit: million baht( 9, million baht 0 baht (2,551.75) million baht 6, million baht 59,000,000 shares 100 baht per share baht per share Therefore, from the Adjusted Book Value Approach, the share price of TPIPP according to the financial statements ending 31 December 2015 after adjustments of assets value is approximately baht per share or about 6, million baht. IFA sees that the Adjusted Book Value Approach has adjusted for the value of real estate (no increase). However, the Adjusted Book Value Approach does not reflect the intrinsic value of TPIPP by not reflecting the future ability to generate profit, the method is therefore not appropriate for the valuation of the shares of or of TPIPP. 3. Historical Market Price Approach The Historical Market Price Approach is a method of valuating a price of a security by referring to the market price of the security on the SET in the past. If the market conditions are normal where investors are able to buy and/or sell the security in the demanded price and volume of the buyer and seller, this valuation method will reflect the value of the security. However, since TPIPP is not a listed security, IFA is not able to evaluate the price of TPIPP using the Historical Market Price Approach

59 4. Market Comparable Approach 4. 1 Price to Book Value Ratio Approach : P/BV Ratio The Price to Book Value Ratio Approach uses the book value of TPIPP as of 31 December 2015 after adjustments for dividend payment which will get a book value of 6, million baht, and multiplies with the average P/BV of other companies that are listed in the SET that conducts similar businesses to TPIPP. The market comparables consists of 15 companies as follow: No. Name of company used as comparable 1 The Bangchak Petroleum Public Company Limited 2 CK Power Public Company Limited 3 Energy Absolute Public Company Limited 4 Electricity Generating Public Company Limited 5 Glow Energy Public Company Limited 6 Global Power Synergy Public Company Limited 7 Gunkul Engineering Public Company Limited 8 Inter Far East Energy Corporation Public Company Limited 9 Ratchaburi Electricity Generating Holding Public Company Limited 10 Sahacogen (Chonburi) Public Company Limited Symbol BCP CKP EA Business Electricity production business from solar power of 38 MW. A holding company that invests in companies generating and distributing electricity from water, solar and heat. Biodiesel producer and distributor and Electric solar energy producer and distributor. EGCO Operating power plants and supply electricity through independent power producer (IPP) and small power producers (SPP), and Providing operation, maintenance, engineering and construction services to power plants both in Thailand and overseas. GLOW IPP - Independent Power Producer GPSC Operates as an electricity, stream and utilities producer and distributor. In addition, the company invests in other companies that generate and distribute electricity, stream and utilities including related businesses both in Thailand and overseas. GUNKUL Produce, procure and supply equipment for electrical system. Produce, procure and distribute electricity from renewable energy resources and construct alternative energy power plants. IFEC Holding Company investing in subsidiaries to produce and distribute electricity from solar and wind and real estate business. RATCH A holding company engaged in the power generation businesses. Moreover, the Company has both local and international projects. SCG Operates electricity and steam energy business, bio mass energy and manufacturer and distributer of wood pellets

60 Market comparables (Continued( No. Name of company used as comparable Symbol 11 SPCG Public Company Limited Business SPCG Run business in investment by holding shares in subsidiaries to operate Business of development of solar farms, construction of solar farms and management and maintenance of solar farms. 12 Superblock Public Company Limited SUPER Holding Company in alternative energy especially in the investment and development of solar power plants and information technology and telecommunication businesses. 13 Power Solution Technologies Public PSTC Design, distribute and equip Power Backup Solution Power and Environment Monitoring Solution and Renewable Energy Power Plants Business. Company Limited 14 Thai Solar Energy Public Company Limited TSE Operate as a producer and distributor of electricity from solar energy (Solar Farm, Commercial Solar Rooftop, and Residential Use Solar Rooftop). 15 TPC Power Holding Public TPCH A holding company which invests in companies generating and distributing electricity Company Limited from Renewable Energy, bio mass power plants and others. Source : Form 56-1 and companies websites The average P/BV of the companies in the period back dating days from 4 March 2016, are summarized s follow: (180 days is enough to address volatility) Symbol Name of company used as comparable Average historical P/B (business days( 15 days 30 days 60 days 90 days 180 days 1 BCP The Bangchak Petroleum Public Company Limited CKP** CK Power Public Company Limited EA** Energy Absolute Public Company Limited EGCO Electricity Generating Public Company Limited GLOW Glow Energy Public Company Limited GPSC** Global Power Synergy Public Company Limited GUNKUL Gunkul Engineering Public Company Limited IFEC Inter Far East Energy Corporation Public Company Limited RATCH Ratchaburi Electricity Generating Holding Public Company Limited 10 SCG Sahacogen (Chonburi) Public Company Limited SPCG SPCG Public Company Limited SUPER Superblock Public Company Limited PSTC Power Solution Technologies Public Company Limited TPCH TPC Power Holding Public Company Limited TSE Thai Solar Energy Public Company Limited Total average Average ** Data from **Average not including CKP and GPSC which has P/BV that is less than average by far at 0.9X times and not including EA which has P/BV that is more than average by far at 9.XX - 11.XX times

61 IFA opines that the business of TPIPP is in the energy sector conducting business of producing and distributing electricity from various sources of renewable energy. Therefore, IFA uses the information of the 15 listed companies that conduct similar businesses in the valuation of TPIPP s shares using Price to Book Value Ratio Approach : P/BV Ratio as comparison. The valuation uses the following formula. Share value of company = P/BV Ratio of market comparables X adjusted book value of the company Summary of share value of TPIPP using the Price to Book Value Ratio Approach Details Average historical P/B (business days) 15 days 30 days 60 days 90 days 180 days Listed companies in the energy sector ** Average ** Shareholder s equity of TPIPP as of 31 December 2015 (million baht) 6, Shareholder s equity of TPIPP (million baht) 16, , , , , Average shareholder s equity of TPIPP (million baht) 17, **Average not including CKP and GPSC which has P/BV that is less than average by far at 0.9X times and not including EA which has P/BV that is more than average by far at 9.XX - 11.XX times. As a summary, the share value of TPIPP using the Price to Book Value Ratio, as of 31 December 2015, the equity value of TPIPP is approximately 16, , million baht with an average of 17, million baht. IFA opines that the Price to Book Value Ratio Approach uses market prices compared to book values of companies in similar business to see how many times it is of the book value which reflects the price premium given by investors. Therefore, the Price to Book Value Ratio Approach is only appropriate for use in comparison. Moreover, the IPO of TPIPP s shares is expected to be in quarter 4 of 2016 because TPIPP is in the process of expanding the power plants business. Also, the increase in revenue in the future from the PPA will allow TPIPP to have increasing performances continuously in 2016 and Therefore, the shareholder s value of TPIPP using the Price to Book Value Ratio Approach will increase accordingly in the future (the Price to Book Value Ratio Approach calculated using the equity value in the financial statement at a period in time without concerning the potential ability to generate profit in the future. Therefore may reflect only the short term value but not the intrinsic value of the business in the long term appropriately, especially for business with high growth)

62 4.2 Price to Earnings Per Share Ratio Approach: P/E Ratio Price to Earnings Per Share Ratio Approach uses the estimated profit of TPIPP as of 31 December 2015 which is million baht and multiply with the average P/E of the listed companies used in 4.1 The average P/E of the listed companies dating back days from 4 March 2016 are summarized as follow: that are listed in the SET that conducts similar businesses to TPIPP. The market comparables consists of 15 companies as follow: (180 days is enough to address volatility) Symbol Name of company used as comparable Average historical P/E (business days) 15 days 30 days 60 days 90 days 180 days 1 BCP The Bangchak Petroleum Public Company Limited CKP CK Power Public Company Limited EA Energy Absolute Public Company Limited EGCO Electricity Generating Public Company Limited GLOW Glow Energy Public Company Limited GPSC Global Power Synergy Public Company Limited GUNKUL Gunkul Engineering Public Company Limited IFEC** Inter Far East Energy Corporation Public Company Limited RATCH Ratchaburi Electricity Generating Holding Public Company Limited SCG Sahacogen (Chonburi) Public Company Limited SPCG SPCG Public Company Limited SUPER** Superblock Public Company Limited N/A N/A N/A N/A N/A 13 PSTC Power Solution Technologies Public Company Limited TPCH** TPC Power Holding Public Company Limited TSE Thai Solar Energy Public Company Limited Total average Average ** Data from **Average not including IFEC and TPCH which has P/E that is less and more than average by far at 90 - >100 times and not including SUPER which P/E is not able to be calculated due to the net loss. IFA opines that the business of TPIPP is in the energy sector conducting business of producing and distributing electricity from various sources of renewable energy. Therefore, IFA uses the information of the 15 listed companies that conduct similar businesses in the valuation of TPIPP s shares using Price to Earnings Per Share Ratio Approach: P/E Ratio as comparison

63 Summary of share value of TPIPP using the Price to Earnings Per Share Ratio Approach Details Average historical P/E (business days) 15 days 30 days 60 days 90 days 180 days Listed companies in the energy sector ** Average ** Profit of TPIPP in 2015 * 1, Shareholder s equity of TPIPP (million baht) 29, , , , , Average shareholder s equity of TPIPP (million baht) 30, * Adjusted profit to be normal profit of TPIPP by adding back loss from the sale of investment in subsidiary amounting to million baht. ** Average not including IFEC and TPCH which has P/E that is less and more than average by far at 90 - >100 times and not including SUPER which P/E is not able to be calculated due to the net loss. As a summary, the share value of TPIPP using the Price to Earnings Per Share Ratio Approach, using the profit of TPIPP in year 2015, the equity value of TPIPP is between 28, , million baht with an average of 30, million baht. IFA opines that the Price to Earnings Per Share Ratio Approach addresses the ability to generate profit in the short term, and does not reflect the intrinsic value of the business, but it is able to be used to compare the market price with the profit of the company to see how much times investors are willing to pay as compared to the profit in that period. Therefore, the Price to Earnings Per Share Ratio Approach is only appropriate for use in comparison. Moreover, the IPO of TPIPP s shares is expected to be in quarter 4 of 2016 because TPIPP is in the process of expanding the power plants business. Also, the increase in revenue in the future from the PPA will allow TPIPP to have increasing performances continuously in 2016 and Therefore, the shareholder s value of TPIPP using the Price to Earnings Ratio Approach will increase accordingly in the future (Price to Earnings Ratio Approach calculated using the profit in the financial statement at a period in time without concerning the potential ability to generate profit in the future. Therefore may reflect only the short term value but not the intrinsic value of the business in the long term appropriately, especially for business with high growth)

64 5. Discounted Cashflow Approach This method will reflect the value of the electricity and related businesses of TPIPP be calculating the net Cashflow of the RDF power plant and waste heat power plant along with other business (1 waste disposal plant, 12 Oil Service Stations and NGV gas stations and Petroleum concession) of TPIPP in the future, and then discounting to find the present value of the Cashflows using the appropriate discount rate. IFA calculated the Weighted Average Cost of Capital: WACC to use as the discount rate and forecasted future Cashflows by forecasting TPIPP s financial statements for the next 26 years on the assumption that TPIPP will continue to procure fuel and produce RDF and sell electricity from the fuels according to the PPA with EGAT for the remaining concession years as well as sell electricity from excess heat waste to TPIPL for 25 years according to the life time of the power plant. TPIPP has one of the biggest SPP power plants from heat waste and waste in Thailand. Currently the total capacity is 150 MW consisting of heat waste power plants of 70 MW ( ) and waste power plants of 80 MW (20+60) in which electricity from waste is sold mostly to EGAT and excess heat waste s electricity is mostly sold to TPIPL. By 2017, the company will expand an additional capacity of 290 MW consisting of waste power plant of 70 MW, coal/waste power plant of 150 MW in which the waste plant has received a Letter of Acceptance to sell electricity to EGAT for an addition of 90 MW and is in the process of signing the PPA. TPIPP has sourced additional sources of Household Municipal solid waste or Household MSW in various provinces such as Saraburi, Ayutthaya, Nakhon Nayok, Nakhon Ratchasima, Chonburi, Ratchaburi, Pathum Thani, Samut Prakan, Buriram, Surin provinces allowing garbage trucks to deliver Household MSW to the RDF power plant of TPIPP. Also, TPIPP buys old waste to use as fuel (priced according to produced energy) from Landfill Facilities and buys already-made RDF as an addition in order to have sufficient materials for future demands. Summary of TPIPP power plant projects Machines Capacity Contract COD SCOD TG1 WHRPP - 20 MW Contract with TPIPL Nov 2009 N.A. TG2 WHRPP - 20 MW Contract with TPIPL Nov 2009 N.A. TG3 RDFPP -20 MW PPA (18MW) 16 Jan Dec 2014 TG4 WHRPP - 30MW * Contract with TPIPL (30MW) / LOI 31 Jan Jan 2016 TG5 RDFPP - 60 MW PPA (55MW) 8 Jun Jul 2015 TG6 RDFPP - 70 MW * Acceptance Letter - 90 MW * N.A. Jan 2017 TG7 Contract with TPIPL (70MW) N.A. Q2/2017 TG8 Contract with TPIPL (150MW) N.A. Q4/2017 Note: TG means Turbine generator COD means Commercial Operation Date SCOD means Scheduled Commercial Operation Date * WHRPP - 30 MW sets COD on 31 January 2016 and sold electricity to TPIPL according to the PPA - 30 MW first, and will wait until RDFPP - 70 MW is completed then combine the 2 plants of 100 MW to sell to EGAT according to the PPA 90MW in January

65 Assumptions used in the production and distribution of electricity of TPIPP The main assumptions used in the valuation of TPIPP are set according to the current plans for the production and distribution of electricity business of TPIPP. The power plants that produce electricity from waste heat, RDF and coal in the present and future are summarized as follow Waste Heat Power Plants (TG 1&2) of 20 MW for a total of 40 MW, in which the company sells the electricity to the cement factory of TPIPL. These power plants have received BOI. 2. RDF power plants/waste heat power plants (TG 3) of 20 MW. The company started selling electricity to EGAT according to the PPA of 18 MW since January The electricity sold to EGAT according to the PPA received an adder from normal rates of 3.50 baht per unit for 7 years. This power plant has received BOI. 3. RDF power plant (TG 5) of 60 MW. The company started selling electricity to EGAT according to the PPA of 55 MW since August The electricity sold to EGAT according to the PPA received an adder from normal rates of 3.50 baht per unit for 7 years. This power plant has received BOI. 4. Waste heat power plant (TG 4) of 30 MW, completed in February In the first period, TPIPP will sell electricity to the cement factory of TPIPL. After that when the RDF power plant of 70 MW is completed, the company will combine electricity produced by this plant with the electricity from the RDF power plant of 70 MW to sell to EGAT. This power plant has received BOI. 5. RDF power plant (TG 6) of 70 MW, project value 3,300 million baht, in under construction and is expected to be completed by the end of The electricity production capacity combined of the waste heat power plant of 30 MW and the RDF power plant of 70 MW will be 100 MW which will be sold to EGAT under the PPA of 90 MW (in the process of signing the PPA with EGAT, and has received a letter of acceptance from EGAT already on 21 November 2014) by the first quarter of The electricity sold to EGAT received an adder from normal rates of 3.50 baht per unit for 7 years. This power plant has received BOI. 6. Coal/RDF power plant (TG 8) of 150 MW, project value 7,300 million baht, is currently under construction and is expected to be completed by quarter 4 of 2017 in which the company sells the electricity to the cement factory of TPIPL. This power plant is in the process of submitting for BOI. 7. Coal/RDF power plant (TG 7) of 70 MW, project value 900 million baht, is an investment project in 2016 and is expected to be completed by June of in which the company sells the electricity to the cement factory of TPIPL. This power plant is in the process of submitting for BOI. Assumption The power plant projects have capacity mentioned above in 1-7, and there are no other additional power plants as of the date of this IFA report. Main assumptions used in the Cashflow projection of TPIPP according to the plans for the production and distribution of electricity business of TPIPP Table summarizing TPIPP power plant projects in the present and future. TG 1&2 Year Capacity 40 MW ( 20MW x 2 ) Amount according to PPA 36 MW Buyer TPIPL Selling rate PEA TOU for large companies (Type 4) for pressure of 69 kwh and above (Average rate in 2016 = baht/kwh) Type of fuel Waste heat Price of fuel 0.06 baht/kwh (price in 2016)

66 TG 3 Year Capacity 20 MW Amount according to PPA 18 MW Buyer EGAT Selling rate EGAT TOU + ADDER (3.50 baht/kwh) EGAT TOU Type of fuel RDF Price of fuel 1,600 baht/ton (price in 2016) TG 5 Year Capacity 60 MW Amount according to PPA 55 MW Buyer EGAT Selling rate EGAT TOU + ADDER (3.50 baht/kwh) EGAT TOU Type of fuel RDF Price of fuel 1,600 baht/ton (price in 2016) TG 4* Year Capacity 30 MW Amount according to 27 MW 90 MW PPA Buyer TPIPL EGAT Selling rate PEA TOU for large EGAT TOU + ADDER EGAT TOU companies (Type 4) for pressure of 69 kwh and above (Average rate in 2016 = baht/kwh) (3.50 baht/kwh) Type of fuel Waste heat Price of fuel 0.06 baht/kwh (price in 2016)

67 TG 6* Year Capacity 70 MW Amount according to 90 MW PPA Buyer EGAT Selling rate EGAT TOU (Average rate in 2016 = EGAT TOU baht/kwh) + ADDER (3.50 baht/kwh) Type of fuel RDF Price of fuel 1,600 baht/ton (price in 2016) Note * WHRPP - 30 MW sets COD on 31 January 2016 and sold electricity to TPIPL according to the PPA - 30 MW first, and will wait until RDFPP - 70 MW is completed then combine the 2 plants of 100 MW to sell to EGAT according to the PPA 90MW in January. TG 7 Year Capacity 70 MW Amount according to PPA 63 MW Buyer TPIPL Selling rate PEA TOU for large companies (Type 4) for pressure of 69 kwh and above (Average rate in 2016 = baht/kwh) Type of fuel Coal Price of fuel 1,845 baht/ton (price in 2016) TG 8 Year Capacity 150 MW Amount according to PPA 135 MW Buyer TPIPL Selling rate PEA TOU for large companies (Type 4) for pressure of 69 kwh and above (Average rate in 2016 = baht/kwh) Type of fuel Coal Price of fuel 1,845 baht/ton (price in 2016) Note Gross Calorific Value: NCV as set as follow: Used RDF heat unit : Gross Calorific Value is set at about 3,500 Kcal/kg Used Coal heat unit : Gross Calorific Value is set at about 4,500 Kcal/kg

68 Figure showing power plants projects in each year classified by the buyers of electricity from TPIPP (accumulated) Power plants selling electricity to TPIPL Currently applying for PPA with EGAT for FIT rate Power plants selling electricity to EGAT Source : Information of TPIPP as of February 2016 Note: WH is Waste Heat power plant RDF is Refuse Derived Fuel power plant Coal is Coal power plant TG is Turbine Generator power plant IFA has forecasted the financial statements to seek the fair value of TPIPP by using information and assumptions given by the Company including interviews with the management and related officers under current economic conditions and situations. If the economy, waste price, PPA with EGAT and other external factors that affect the operations of TPIPP including TPIPP s situation changed significantly from the stated assumptions, the fair value of the company using this method may change as well