) Information Memorandum : TTW

results of operations, financial condition and future revenue. Nevertheless, the Company believes that if Pathum Thani Water can prove that the increase of the project value in excess of Baht 1,000 million is due to external and subsequent factors, the Agreement would not be considered as having been entered into to avoid the application of the Private Sector Participation Act. 1.2 Risks relating to the unequal term of the Concession and the Water Purchase and Sale Agreement between the Company and PWA While the term of the waterworks business concession granted to the Company by the Concession Grantor is 25 years (ending on 10 March 2030), the term of the Water Purchase and Sale Agreement No. 189/2543 between the Company and PWA is 30 years (ending on 20 July 2034). The Company cannot assure that it will be granted an extension of the concession period or that it will know the Concession Grantor's decision before the concession period ends. If the Company fails to obtain an extension of the concession period during the period between the two different end dates, the Company may become the defaulting party under the Water Purchase and Sale Agreement due to its inability to produce and distribute tap water to PWA. This would have a material adverse effect on the Company's results of operations, revenue and financial condition. In addition, even if an extension of the Concession is granted, the period for which the Company may operate the waterworks business may not be equal to the period for which it may sell tap water to PWA under the Water Purchase and Sale Agreement. Moreover, although the Water Purchase and Sale Agreement contains a provision allowing the Company to request an extension of the Agreement, which must be agreed upon by both parties, the Company cannot assure that the extension would be under the same terms as those contained in the expired Agreement or whether the terms would be materially different. If the Agreement is not renewed and the Company has to find a new buyer, the Company may have to incur increased costs due to the need to invest in new equipment suitable for the new buyer, which could affect the Company's results of operations, revenue and financial condition. 1.3 Risks relating to the inability to comply with the conditions as specified in the Water Production and Distribution License Agreement, dated 31 August 1995 (the Licence Agreement) The Licence Agreement between Pathum Thani Water and PWA contains a provision requiring Pathum Thani Water to ensure that its water production system at the water distribution station has adequate production capacity to supply the MOQ to be purchased plus 30% thereof at all times from the day it begins operation. If the MOQ as determined by PWA plus 30% thereof is more than the maximum production capacity of Pathum Thani Water (the maximum installed production capacity of the water production system of Pathum Thani Water is 288,000 cubic metres per day), PWA and Pathum Thani Water must negotiate a revision of the scope of work under the Licence Agreement, to be made in writing, to enable Pathum Thani Water to comply with the requirement first. If the parties cannot agree, PWA may consider that the condition regarding the adequacy of the production capacity as stipulated in the License Agreement has not been satisfied. If the right to terminate is exercised, it would have a material adverse effect on the Company's results of operations, business, revenue and financial condition. Nevertheless, Pathum Thani Water believes that PWA was aware of its maximum production capacity from the time of negotiation until the day that the Licence Agreement was entered into. Thus, the MOQ plus 30% thereof stipulated in the License Agreement should not be higher than Pathum Thani Water's maximum production capacity until an amendment is agreed upon in writing. 1.4 Risks relating to termination of the Water Purchase and Sale Agreement(s) and/or the Licence Agreement The Water Purchase and Sale Agreement(s) and/or License Agreement of the Company and Pathum Thani Water may be terminated if any of the events specified in such agreements occur. To exercise the right to terminate the Water Purchase and Sale Agreement and/or the Licence Agreement, PWA must serve a written notice to allow the Company and/or Pathum Thani Water to remedy the breach within a specified period first. Only if the Company and/or Pathum Thani Water fail to remedy the default within the specified period, PWA will be entitled to exercise the termination right. However, if PWA exercises its right to terminate the Water Purchase and Sale Agreement and/or the License Agreement, PWA may seize the security which the Company and/or Pathum Thani Water have placed with it. Moreover, PWA is entitled to claim damages or reimbursement of any expenses incurred as a result of the breach of the relevant agreement. This could have a material adverse effect on the business and financial condition of the Company and Pathum Thani Water. 2. Risks relating to the waterworks business concession(s) 2.1 Risks relating to the Ministry of Natural Resources and Environment's refusal to renew existing concessions or grant a new concession requested for the expansion of the service area or the increase of production capacity The decision on whether to renew the concession or grant a new concession for the expansion of the service area or the increase of production capacity rests in the sole discretion of the Concession Grantor. Due to a number of factors, therefore, the Company cannot assure whether it and Pathum Thani Water would be granted an extension of the current concessions or a new concession for the abovementioned purposes. Even if the Company and Pathum Thani Water were granted an extension of the current concessions or a new concession, the Company cannot assure that the conditions of the concessions would remain unchanged or that there will not be additional terms or conditions, which may have a material adverse effect on the ability of the Company and Pathum Thani Water to operate a waterworks business, their revenue and business prospects. 2.2 Risks relating to the terms of the Concessions which may affect the Company's Operations. (1) After half of the concession period has elapsed, the Concession Grantor may exercise its right to revoke the Concession if the Government or a local administration wishes to purchase the entire waterworks operations of the Company and/or Pathum Thani Water. In that event, the Company and/or Pathum Thani Water will not be able to operate their waterworks business until the end of the concession term and to achieve the projected return on investment. This could have a material adverse effect on the results of operations, revenue and financial condition of the Company and Pathum Thani Water. Furthermore, although the Concession provides for a buyback at a market price, the Company and Pathum Thani Water cannot assure that the designated buyback price would cover the capital investment that the Company has invested in the waterworks business and other benefits that the Company and Pathum Thani Water would have received had they been able to continue their operations until the end of the concession term. (2) The Company and Pathum Thani Water risk being ordered by the Concession Grantor to change the water charge rate at the end of the 3-year period from the signing of the Concession if a local administration or a consumer requests the Concession Grantor to change the water charge rate or the method of calculation of water charge. In this regard, the Concession Grantor has a discretion to consider such request and if it is satisfied that a change of the water charge rate or the method of calculation of water charge is appropriate due to the fact that the circumstances on which the determination of the water charge rate or the water charge calculation method was based have changed, then the Concession Grantor has the power to issue an order in writing to change the water charge rate or the method of calculation of water charge to what the Concession Grantor deems fair and appropriate. The Company and Pathum Thani Water must comply with such order, which could seriously affect the operations, revenue and financial condition of the Company and Pathum Thani Water. Nevertheless, the Company is of the view that the change to the water charge rate is unlikely, as the Company and Pathum Thani Water do not provide services to any local administration or consumers but to PWA exclusively. (3) If the Government or a local administration wishes to build or expand any road or public place or if a private entity requests that any equipment obstructing the entrance to his/her house or land be removed, whether such road was existed before or was constructed after the installation of the equipment, and the Government or local administration approves such request, the Company and Pathum Thani Water must remove the equipment located in the public place and obstructing the construction or expansion or obstructing the entrance as requested by the Government or the relevant local administration without claiming compensation. If such order is an order to relocate the bulk transmission main pipeline, the Company and Pathum Thani Water may have to incur the cost of relocating the bulk transmission main pipeline without any compensation. However, the Company may be reimbursed by PWA under the Water Purchase and Sale Agreement if the capital expenditures or operating expenses increase to more than Baht 1 million through no fault of the Company. On the other hand, Pathum Thani Water may not request reimbursement from PWA, as the Licence Agreement between PWA and Pathum Thani Water does not contain a similar term. This could therefore affect Pathum Thani Water's revenue and business prospects. 2.3 Risks relating to revocation of the Concessions The Concession Grantor may revoke the Concessions on any of the following grounds: (1) The Company and Pathum Thani Water fail to distribute tap water for more than 3 days unless this is caused by an event of force majeure. (2) The Company and Pathum Thani Water fail to comply with any rules or any terms of the Concessions for one month or more and the Concession Grantor has given a written notice at least 15 days before issuing an order revoking the Concessions. (3) The water production plant, equipment or any substantial part of the waterworks operations are seized by a court judgement. If the Concession Grantor revokes the Concessions, the Company and Pathum Thani Water will not be able to continue to produce and distribute tap water, which will have a material adverse effect on the Company's operations, revenue and financial condition. 3. Risks relating to the business operation 3.1 Risks relating to being refused permission to use areas currently used for laying the bulk transmission mains The Company cannot assure that each of the relevant authorities supervising the areas where the bulk transmission mains and local distribution networks of the Company are located or pass through will demand the fee for using the areas at a reasonable rate. Moreover, the Company cannot give an assurance that those authorities will not allow other parties to use such areas or construct any structures over the bulk transmission mains, which may damage them or obstruct their reparations. Therefore, if the Company and Pathum Thani Water are unable to use the areas to lay the bulk transmission mains, or are required to pay a high rate of fee for using the areas, or are unable to access the area to repair the bulk transmission mains in a timely manner, the Company's and Pathum Thani Water's business, financial condition, results of operations and business prospects could be adversely affected. 3.2 Risks relating to raw water sources (a) Ability to pump water from raw water sources for the production of tap water Pathum Thani Water has been pumping water from the Chao Phraya River beyond the amount approved by the Office of the National Water Resources Commission since September 2006 and will stop pumping water beyond the approved amount when its new production plant becomes operational. At present, there is no authority empowered to make a claim of wrongdoing due to the absence of any relevant laws. Furthermore, the Rules of the Office of the Prime Minister governing the Management of National Water Resources, B.E. 2550 (2007), which make references to the power and responsibilities of the National Water Resources Commission and the River Basin Commission, do not contain any provision on the power to make a claim against those who do not comply with the conditions of a permission to pump water. Notwithstanding this, the Company cannot assure that the Office of the National Water Resources Commission will not ask for co- operation from the authorities which have the power to control Pathum Thani Water's operations to order it to stop pumping water beyond the permitted limit, which would have an adverse effect on its revenue and results of operations. (b) Adequacy of raw water sources and search for reserve water sources The volume of raw water in the water sources depends on several factors beyond the Company's control. At present the Company and Pathum Thani Water have not proceeded to procure any reserve water sources to replace the current raw water sources due to the high investment cost involved in building a reserve water source system. Although the Water Purchase and Sale Agreement between the Company and PWA stipulates that PWA agrees to reimburse the Company if the Company is unable to produce enough water to meet the MOQ due to its inability to find other sources of water of comparable quality to that of the current sources, the Company cannot assure that the supply of raw water from such sources will be adequate for use by the Company and Pathum Thani Water to produce tap water in accordance with their current production capacity or the production capacity that may be increased in the future. Nor can it assure that the Company and Pathum Thani Water will be able to find other water sources as alternative sources for their tap water production. This would have a material adverse effect on the business, results of operations and business prospects of the Company and Pathum Thani Water. (c) Costs of raw water charges Although the Company or Pathum Thani Water do not currently have any expenses for the pumping of raw water from these two water sources. The Company cannot assure that a new law will not be enacted in the future to impose and collect rates for use of water pumped from the natural raw water sources and whether there would be an impact on the cost of tap water production for the Company and Pathum Thani Water. However, the Water Purchase and Sale Agreement has a term which provides that if a fee is collected for the use of raw water, which increases the production cost of the Company and Pathum Thani Water, the Company will be able to request reimbursement of the whole amount paid in respect thereof. However, Pathum Thani Water may adjust its water charge rates in line with the increased costs only after there is an agreement, failing which the matter shall be resolved through the dispute resolution proceedings. Thus, if any government authority collects the fee for the use of raw water and PWA and Pathum Thani Water fail to reach an agreement, Pathum Thani Water's business, financial condition, results of operations and business prospects may be adversely affected. (d) Quality of raw water One of the major costs of tap water production is the cost of chemicals, which varies according to the quality of raw water. The Company cannot assure that the quality of the raw water sources of the Company and Pathum Thani Water will remain suitable for use in the tap water production. If the quality of raw water from these sources falls below the standard, the quantity of chemicals used to improve their quality will increase. This would mean higher cost for both the Company and Pathum Thani Water, which could have an adverse effect on the business, financial condition and result of operations of Pathum Thani Water. Under the Water Purchase and Sale Agreement, the Company is entitled to request reimbursement from PWA for the increased costs. However, if PWA is unable to reimburse the Company, the Company may be compensated by other means such as adjustment of the term of the Water Purchase and Sale Agreement or adjustment of the water charge rate. 3.3 Risks relating to exclusive reliance on one customer All tap water produced by the Company and Pathum Thani Water is sold exclusively to PWA, which will thereafter distribute it to consumers. The Company and Pathum Thani Water cannot distribute tap water directly to consumers through PWA's distribution systems. Therefore, the total reliance on PWA as their sole customer creates inherent risks for the Company and Pathum Thani Water. 4. Risks relating to changes in legislation and regulations governing tap water operations or State policies 4.1 The Company and Pathum Thani Water may be affected by changes in the laws. (a) Laws related to waterworks operations The Ministry of Interior has taken steps to prepare a draft of the Water Business Act (the Draft Water Business Act) to set up a supervisory system for overseeing water business operations including tap water operations to ensure that they are appropriate and transparent as well as to promote efficiency in the operations of the water business to ensure that the public receive services from the water business which meet the required standards, are of good quality, fair and extensive. The aim is also to promote fair competition in the water business and prevent improper use of monopolistic power. To this end, the National Waterworks Supervisory Commission will be established as an organisation charged with the supervision of the water business to determine measures, rules, methods and conditions for operating the business, to determine the qualifications, methods, criteria, conditions and term of the business license, etc. and to carry out its duties in accordance with the objectives of the Draft Water Business Act. However, to date, this Draft Water Business Act has not been proposed for consideration and when that might happen is uncertain. Therefore, the Company is unable to forecast the way in which the supervisory power of the National Waterworks Supervisory Commission will be exercised, the nature and scope of policies and regulations, the supervisory measures to ensure their effective implementation and the enforcement of the laws and various regulations which will be announced in the future. Such uncertainty, therefore, may place the Company's operations at risk. Changes in the legislation and the relevant regulations may also have an adverse effect on the Company's business, revenue, financial condition, results of operations and business prospects. (b) Laws governing utilisation of raw water sources On 29 May 2007, the Cabinet adopted a resolution approving the principles of the Draft Water Resources Act proposed by the Ministry of Natural Resources and Environment. The Draft Water Resources Act essentially concerns the rights in water resources, the organisation for river basin administration, the water user organisation and water resources management. In addition, the Draft Water Resources Act divides the types of water usage into 3 classes and gives the National Water Resources Commission general power to manage water resources as well as other powers and responsibilities, including the consideration and grant of Class 2 licenses, which is of relevance to the Company (i.e. use of water resources from public sources for the purpose of agriculture or commercial animal husbandry, industry, tourism, energy generation, electricity generation, waterworks or other activities as prescribed in the Ministerial Regulation). Permission to use water resources must be obtained from the River Basin Commission where such public water sources are located, under the terms and conditions prescribed in Ministerial Regulation. Currently, such Ministerial Regulation has not been drafted. Therefore, the Company cannot forecast the way in which the supervisory power of the River Basin Commission will be exercised with regards to the water sources under its supervision or the nature and scope of its rules and policies. This (more)