) IFA's Opinion regarding the connected transaction of TTW

Note: *Under improvement for capacity expansion to 18,000 cu.m./day Sources : 1/ BLDC 2/ Website of Ban Wah Industrial Estate 3/ Website of Saharattana Nakhon Industrial Estate From the above information, Bangpa-in Industrial Estate and Ban Wah Industrial Estate have been mostly occupied. Thus, water demand in these industrial estates depends mainly on capacity expansion of entrepreneurs. 1.7 Payment method The Company will pay BLDC a total fee of Bt. 1,400 million (one thousand four hundred million baht only) by three installments as shown in the table below: Installment Amount (Bt. million) Date of payment 1st Installment 1,000 Date of agreement signing 2nd Installment 200 365 days from the date of agreement signing 3rd Installment 200 730 days from the date of agreement signing Total 1,400 As of March 31, 2009, the Company had cash and cash equivalents in the amount of Bt. 2,084.54 million which is adequate for purchase of the Operating Rights. However, in June 2009, after considering the attractive terms and conditions of two financial institutions' offers; unsecured loans in the total amount of Bt. 1,500 million with the term payment of approximately 10 years and charge the interest rate by referring the deposit rate plus margin and MLR minus margin, which are lower than the market interest rate, the Company may decide to borrow loan from such financial institutions to be used for payment of the Operating Rights to BLDC. Presently, the Company is in process of negotiation with both financial institutions. In doing so, there will be no material effects on the Company's liquidity and it will not be considered a breach of the existing loan agreements and/or financial covenants specified under its debenture issue to the public in the first quarter of 2009. Page 39 of the total 92 pages The Opinion Report of the Independent Financial Advisor 2. Reasonableness of the Transaction 2.1 Objective and necessity of the Transaction The Independent Financial Advisor has the Opinion that the acquisition of Operating Rights in Bangpa-in Indutrial Estate is aligned with the Company's tap water business objective as the Company can enlarge its tap water distribution coverage from Nakhon Pathom and Samut Sakhon provinces to Bangpa-in Indutrial Estate in Phra Nakhon Si Ayutthaya province, thus helping to promote the Company's image as the largest privately owned producer of tap water in Thailand. In addition, to acquire such right will enable the Company to run a comprehensive tap water business, ranging from production to distribution and service charge collection from customers in Bangpa-in Indutrial Estate. Therefore, the Company's service coverage will be expanded and mitigate risk from reliance on a sole customer, PWA. The Company will also be authorized to render a waste water treatment service to the operators in Bangpa-in Indutrial Estate, which corresponds with its policy to diversify into other related business. Accordingly, this Transaction will be a starting point and give it an opportunity to expand the scope of services to the private sector customers. This will at the same time help to boost its income from the business operations and relatively strengthen its income stability in the long run through the 30-years term of the Operating Rights. The Company can then exploit its experience and skill in the tap water production for a successful operation at Bangpa-in Industrial Estate. 2.2 Advantages and disadvantages between making and not making the Transaction Advantages and disadvantages of making the Transaction Advantages of making the Transaction 1. An opportunity of business scope expansion The Company and PTW have been producing and supplying tap water for PWA to distribute to users through PWA's own distribution system. In this light, both of them serve merely as sub-contracted producers for PWA. The acquisition of Operating Rights will therefore be a starting point for the Company to diversify into a fully- fledged tap water business, ranging from production to distribution and service charge collection from private sector users. This Transaction wlll also enable the Company to expand the service coverage from Nakhon Pathom and Samut Sakhon provinces, the areas originally served by the Company and PTW, to Bangpa-in Industrial Estate in Phra Nakhon Si Ayutthaya province. Additionally, the Company will have an opportunity to launch a new line of business, i.e. waste water treatment services for customers in such industrial estate. This will pave the way for TTW to introduce its tap water production management and waste water treatment services among other industrial estates and/or other target areas in the future. Page 40 of the total 92 pages The Opinion Report of the Independent Financial Advisor 2. A boost of income and a stronger income stability in the long term The purchase of Operating Rights from BLDC will help to boost TTW's income from tap water supply and waste water treatment services in Bangpa-in Industrial Estate. Between 2006 and 2008, the total revenues from tap water distribution and waste water treatment services in Bangpa-in Industrial Estate accounted for around Bt. 142.77 million, Bt. 162.03 million and Bt. 169.62 million, respectively. The said additional income will strengthen the Company's cash flow and earnings per share in the future. However, the projected performance might change and be uncertain; therefore, these fiqures could not be guaranteed the projected performance would have quantity and/or grow at the same direction as the past performance. Further, the business operations at Bangpa-in Industrial Estate will increase the Company's income stability in the long run, considering that it will be a sole authorized producer and distributor of tap water and provider of waste water treatment services for customers in Bangpa-in Industrial Estate throughout the agreement term of 30 years. Besides, according to the drafted Operating Rights Agreement, BLDC agrees to give a minimum off-take guarantee for TTW's tap water sales in the industrial estate for a period of three years (2010-2012) in an amount of 15,513 cu.m./day, 16,429 cu.m./day, and 18,401 cu.m./day respectively, representing a growth rate of about 5.9% in 2011 and 12.0% in 2012, and also a guarantee for the minimum waste water amount for a three-year period of 11,480 cu.m./day, 12,157 cu.m./day, and 13,617 cu.m./day respectively, representing roughly 74% of the minimum off-take guaranteed amount. It is further guaranteed that there will be a 120-MW power plant erected in the industrial estate by 2013, which will have a minimum tap water demand of 2,000 cu.m./day together with demand for waste water treatment service. These guarantees will help stabilize TTW's income generation over the said period to a certain extent. Moreover, there are still some unsold spaces within the industrial estate and some sold areas that are under plant construction or not yet operative and, thus, after those plants have come into commercial operation, the demand for tap water and waste water treatment services will further grow, thereby boosting the Company's revenues and operating performance. 3. Increase of market share and sustaining of market leadership The acquisition of Operating Rights from BLDC, which has a production capacity of 48,000 cu.m./day, will increase TTW's market share, bringing the Company and PTW's combined maximum capacity up to 756,000 cu.m./day. and thus making TTW still the market leader. This will help not only to boost its competitive edges and reliability among investors, but also to create an opportunity and bargaining power in a bidding for treated water production and management services in other industrial estates and/or other areas in the future. 4. Mitigation of risk from reliance on a sole customer The Company and PTW have been selling tap water solely to PWA and PWA further distributes the tap water to end-users. As a consequence, the Company and PTW bear risk from sole dependence on PWA as their only customer. Given that PWA, which is a state enterprise, changes its tap water business management policy Page 41 of the total 92 pages The Opinion Report of the Independent Financial Advisor and/or terminates or discontinues the tap water purchase agreement, the Company and PTW's working performance will be negatively impacted. This Transaction will accordingly enable the Company to sell the tap water and provide the waste water treatment services directly to customers in Bangpa-in Industrial Estate, hence an expanded customer base. Even though the income from business operations at Bangpa-in Industrial Estate is less than that earned from the tap water sales to PWA, such expanded customer base will help to reduce the sole reliance on PWA to some extent. As of June 2009, there were 71 privately owned entities operating businesses in this estate. So, if in the future the number of entities augments and/or TTW diversifies its markets to other areas and/or other industrial estates, its customer base will be further enlarged and such risk will be lowered. 5. TTW's experience and expertise in treated water production The Company and PTW have produced and supplied tap water to PWA since 2004 and 1998 respectively without any problem or disruption. The treated water production technology adopted in Bangpa-in Industrial Estate is quite the same as that currently employed by the Company and they also supply raw water from the same source, the Chao Phraya River. It is thus believed that based on its experience and skills in the treated water supply management and operation, the Company can as well perform successfully at Bangpa-in Industrial Estate. 6. Prompt income recognition from this business expansion, leading to time saving in license application and new facilities construction In this Transaction, the Company is able to recognize income immediately after a transfer of Operating Rights from BLDC. On the contrary, under their usual practices, the Company and PTW are to follow the time-taking bidding and bargaining processes with PWA in order to obtain rights to produce tap water and construct facilities for treated water supply to PWA and to obtain all regulatory licenses. Moreover, the Company must waste time building the production system facilities, which normally takes around two years. Given it has to follow these processes, the income recognition from this business expansion will be delayed. 7. Benefit in value chain TTW can cash in on an efficient use of existing resources for the optimal benefit of the whole group of companies. Specifically, it can save costs by making a big-lot procurement of chemicals, which are one of the major production costs, and/or it can share the supporting resources with its subsidiaries such as an assignment of BJT Water Co., Ltd. to handle the repair & maintenance works and/or TTW's own units such as Human Resource & Administration Division and Accounting & Finance Division to handle the same tasks at Bangpa-in Industrial Estate, thereby helping to boost the operational efficiency and maximum use of resources. Disadvantages of making the Transaction 1. Risk from lower-than-projected revenues from tap water sales and waste water treatment services TTW is obliged to pay a fee of Bt. 1,400 million to BLDC (within three years) for the purchase of rights to manage and operate the treated water supply and waste water treatment services for customers in Bangpa-in Page 42 of the total 92 pages The Opinion Report of the Independent Financial Advisor Industrial Estate for a 30-years period. Such amount has been computed from the net present value of the projected revenues the Company expects to earn over the next 30 years. As such, the Company risks gaining the actual future income from tap water supply and waste water treatment services in an amount lower than the projection as a result of factors such as economic slowdown, political instability, natural disasters, etc. that might prompt customers in Bangpa-in Industrial Estate to either reduce or freeze their production capacity or might cause the Company to be unable to revise up the selling prices or the service charges as IEAT had not approved. This will likely hurt the Company's cash flow from the business operations at Bangpa-in Industrial Estate and its ability to service debts to financial institutions by the agreed amount or tenor and/or to obtain a reasonable return that can cover the cost of operating right acquisition, thus ultimately hitting the overall performance of TTW and its subsidiaries. To cushion against this risk, the Company makes it a condition in the Operating Rights Agreement that BLDC shall provide a minimum off-take gurantee for treated water sales and guarantee for the minimum waste water amount for a three-year period (2010-2012) together with a guarantee for establishment of an SPP project within Bangpa-in Industrial Estate by 2013. 2. Greater debt burden which may hurt TTW's liquidity As of March 31, 2009, TTW and its subsidiaries recorded a debt to equity ratio of 1.21 times. In June 2009, the Company was offered a credit line of Bt. 1,500 million from two financial institutions on a collateral-free basis and under attractive terms and conditions. It is considering using such financing source for covering the cost of this Operating Rights acquisition. By doing so, its debt to equity ratio will edge up to 1.37 times (based on data from the Q1/2009 consolidated financial statements ended March 31, 2009) and it will be burdened with the principal and interest payments in respect of such borrowing. Additionally, considering to the financial ratio under the condition in the debenture agreement, the ratio of total liability to EBITDA have not to exceed 4 times and the ratio of EBITDA to interest expense have not to exceed 3 times. After borrowing loan of Bt. 1,400 million, the ratio of total liabilities to EBITDA as of March 31, 2009, would increase from 2.61 times to 3.09 times, and the change in the ratio of EBITDA to Interest Expense could not be concluded at this time as the interest rate for the borrowing loan 0f Bt. 1,400 million is still unconfirmed. The ratio of EBITDA to Interest Expense as of March 31, 2009 would be 5.35 times, which is complied with the conditions of the debenture agreement. According to the assumptions used for the financial projection, the net cash receivable expected from the business operations at Bangpa-in Industrial Estate will likely be inadequate for such debt service under a 10-year repayment term. Thus, the Company may need to pay such debt out of cash flow provided from its usual operating activities or other activities, which may relatively hurt its liquidity during the repayment period. Presently, the Company is negotiating with the financial institutions for a grace period in the first two to three years so as to avert any adverse impact on its liquidity and cash flow. Page 43 of the total 92 pages The Opinion Report of the Independent Financial Advisor 3. A loss of investment opportunity in the other projects If after the purchase of Operating Rights the Company discovers other more lucrative projects than this one, it will then lose a better investment opportunity due to its capital or leverage constraints. This is because in Q1/2009 the Company issued and offered for sales the debentures which have established a number of financial covenants to be fulfilled by the Company as of every year-end, consisting of (1) D/E ratio at not over 2 times, (2) net debt to EBITDA ratio at not over 4 times, and (3) EBITDA to interest expenses at not less than 3 times. From these constraints, it will be impossible for the Company to fund any other project investments by additional borrowings. If this really happens, however, the Company plans to raise funds through the capital market. 4. Burden and risk associated with incremental investments In the acquisition of Operating Rights, TTW plans to additionally invest Bt. 15.37 million in the system modification to ensure service and safety completeness, entailing, for example, the construction of additional buildings and facilities, repair of waste water treatment ponds, improvement of room partitions, additional erection of fire extinguishers, lightings and CCTVs, etc. It is moreover possible that the Company will have to additionally invest in an expansion of the waste water treatment capacity to gear up for the future growing demand for treated water of customers in Bangpa-in Industrial Estate. Based on the assumption that waste water volume accounts for 72.70% of tap water consumption (which is an average of one retroactive year up to May 2009), the existing maximum treatment capacity of 18,000 cu.m./day can then serve the tap water consumption of customers in Bangpa-in Industrial Estate for only 24,760 cu.m./day at maximum. Therefore, once such consumption volume has exceeded 24,760 cu.m./day, the Company will have to invest in an expansion of its treatment capacity. This is in line with a condition set out in the Operating Rights Agreement that BLDC agrees to have the Company undertake the waste water treatment expansion operation at the Company's cost throughout the agreement term without any extra compensation to BLDC, whereby any such additional assets shall forthwith belong to BLDC at no cost. Therefore, the Company may have to be financially prepared for any such incremental investment. In late 2008, BLDC executed an agreement to improve and increase the waste water treatment capacity from 12,000 cu.m./day to 18,000 cu.m./day with the investment budget of BLDC at an estimated cost of Bt. 28.89 million. According to TTW, it is financially prepared for an additional investment at such cost, given that it becomes necessary to boost the waste water treatment capacity in line with the growing future tap water demand, as this will in turn increase its income that can cover the said investment cost. Nonetheless, if the Company deems that the remaining agreement period by that time is not enough for it to make the investment worthwhile, the Company can, as allowed in the Operating Rights Agreement, negotiate with BLDC for an extended term and compensation during such period. Moreover, the Company may have to additionally invest in the waste water treatment capacity expansion in the event that the incoming waste water is of extremely poor quality or of high filthiness value, which will require a longer treatment time and might be beyond the existing treatment capability, leading to a needed additional Page 44 of the total 92 pages The Opinion Report of the Independent Financial Advisor investment in the capacity expansion despite an insignificant increase in the waste water amount. However, the Company deems that there is a slim chance of this event taking place, based on the historical records on the treatment services over the past five years which revealed that the service charges, in connection with the level of waste water quality, has been on a decline, thus exhibiting an improvement in the waste water quality. Besides, the Company was able to collect extra treatment charges on the low quality waste water. It is also prescribed in the Operating Rights Agreement that the Company shall, without contradiction to any other regulations or notifications of IEAT or other concerned authorities, have the right to refuse to provide the treatment services to customers in Bangpa-in Industrial Estate on a reasonable ground that the quality of incoming waste water is below the treatable level or that any such treatment, once carried out, will likely damage the treatment plant. Advantages of not making the Transaction 1. No debt burden arising from additional borrowings to cover the cost of Operating Rights acquisition TTW tentatively plans to raise loans totaling Bt. 1,400 million from financial institutions to pay for the Operating Rights. If it decides not to purchase the Operating Rights, it will not need to raise such borrowings and bear no interest expenses thereon. 2. Ability to invest in other projects If the Company decides not to acquire the Operating Rights from BLDC, it will be able to invest such funds in other project that will probably be more lucrative. However, the investment in other project remains uncertain and the Company will need some time to identify an appropriate project and further conduct a feasibility study and negotiation. Disadvantages of not making the Transaction 1. A loss of opportunity of business scope expansion The Operating Rights acquisition will give an opportunity for TTW to run a comprehensive tap water (more)