) IFA's Opinion regarding the connected transaction of TTW

million and shareholders' equity of Bt. 393.36 million as of December 31, 2008. Therefore, if BLDC uses the proceeds obtainable from sale of the Operating Rights of Bt. 1,400 million for loan repayment and/or re-investment in other project and/or lending to other individual and/or juristic persons and/or payment of dividends or other form of returns to its shareholders (BLDC does not plan to diversify into any new businesses in the near future other than the SPP project), the Company might be unable to claim the said fee paid for the Operating Rights purchase from BLDC. As described above, however, both TTW and BLDC believe that the termination of the Operating Rights Agreement is unlikely to happen. So, if there is a requirement for provision of collateral to cover this risk throughout the 30-year agreement term, it might lead the other party to bargain for a higher price and/or to demand the collateral from the Company as well. 2.4.7 The Opportunity of the future related party transactions and measures and approval process TTW's acquisition of the Operating Rights at Bangpa-in Industrial Estate will probably lead to the following related party transactions with the connected persons in the future: 1) The related party transactions with BLDC in the sales of tap water or provision of guarantee for minimum off-take quantity and minimum waste water treatment quantity, and expenses on community services and garbage disposal services provided by BLDC at Bangpa-in Industrial Estate. 2) The related party transactions with Bangkok Expressway Plc. ("BECL") as BECL has bought a land area of 126.72 rai in Bangpa-in Industrial Estate for its concrete pile casting section, hence likely to use the tap water supply and waste water treatment services from TTW. In 2008 and Q1/2009, BECL purchased the tap water and used the waste water treatment services in a total amount of Bt. 2.56 million and Bt. 1.91 million respectively. 3) The related party transactions with CH. Karnchang Plc. ("CK") after CK Board of Directors on March 3, 2009 approved an investment in the construction of an SPP project at Bangpa-in Industrial Estate, thereby Page 52 of the total 92 pages The Opinion Report of the Independent Financial Advisor potentially leading to CK's demand for tap water supply of about 2,000 cu.m./day and also for waste water treatment services, with the SPP project expected to become operational by 2013. 4) The related party transactions with Phromprathan Construction Ltd. Part. ("PPC"), of which Mr. Yim Trivisvavet, who is close relative of the connected person is partner and indirectly held through Ch. Karnchang Real Estate Co., Ltd. PPC is a contractor of a tap water project (surface water source) at Bangpa-in Industrial Estate with a system warranty provided for one year starting February 1, 2009. The above related party transactions expected in the future are the usual course of business conducted by the Company with market-based service charges. In case the Company will set the service charges at unusual rates and/or needs to enter into any transaction with a possible conflict of interest in unusual course of business, it will strictly abide by the rules of the Stock Exhange of Thailand and/or the Securities and Exchange Commission. Page 53 of the total 92 pages The Opinion Report of the Independent Financial Advisor 3. Fairness on pricing and conditions of the Transaction 3.1 Appropriateness of transaction price Normally, there are 6 widely acceptable methods to value the price, which are: 1) Book Value 2) Adjusted Book Value 3) Market Price 4) Price to Book Value Multiple 5) Price to Earning Multiple 6) Free Discounted Cashflow Hence, the above methods are appropriate to value a common share or firm; however, to proceed the Transaction is to purchase the right to operate business in Bangpa-in Industrial Estate, not to purchase a common share. Therefore, the third - fifth method could not be applicable because those method is to value a common share of the similar company or vertical integration company by comparison or using financial ratios to calculate a common share or firm. In addition, the Company would not own the title of the purchased assets; therefore, the first and second method could not also be applicable as those methods would refer the book value or accounting value after the adjustment on the purchased owned asset. Therefore, the Independent Financial Advisor has the Opinion that the discounted cash flow approach is the only method to identify the fairness and appropriateness of the purchase price of the Operating Rights since the faire value can be computed from the projected revenues to be received from operating in the industrial estate. The Independent Financial Advisor shall use a discount rate for figuring out the net present value of cash flow expected from the Company's operations at Bangpa-in Industrial Estate for a period of 30 years from September 2009 to August 2039 as defined in the agreement. The Independent Financial Advisor have prepared the financial projection based on the business and financial assumptions mutually screened by the Company and the IFA. Here are sources of the data applicable: ? BLDC's financial statements for 2006-2008 and internal data for January - May 2009 ? PTW's internal data for 2008 and Q1/2009 ? Business and financial information of BLDC, relevant industry information and information disclosed to the public ? Technical Due Diligence Report prepared by EEC Engineering Network Co., Ltd. in June 2009 ? The drafted Operating Rights Agreement dated July 2, 2009 ? Information and analytical results obtained from interviews with the Management and working group of TTW and BLDC In addition, the Independent Financial Advisor has established other relevant assumptions that are material to the cash flow, operations and future business of the project. If there is any factor impacting the operations Page 54 of the total 92 pages The Opinion Report of the Independent Financial Advisor according to the said assumptions, the purchase price of the Operating Rights valuated herein will probably be affected. The assumptions are as follows: 1. At present, there is no specific state agency in charge of fee collection on the use of raw water. The water resources legislation has been drafted and undergone an array of public hearings, but still not finalized. The Office of Water Resources Policy and Planning, under the Department of Water Resources, sent a letter No. ThorSor 0604.2/354 dated July 24, 2007 permitting BLDC to use raw water from a natural resource and thus far no fee for the use of such water resource has yet been collected. In this projection, such expense is not factored in due to the great uncertainty of this issue as it will broadly affect a large number of users of natural water resources and the criteria on the fee collection remain unclear. Nonetheless, once the raw water fee collection is applicable in the future, it will likely affect the projected performance from the Operating Rights, unless the Company can revise up its service charges with customers in Bangpa-in Industrial Estate to compensate for the said extra cost, as was the case when BLDC successfully urged for upward adjustment of water selling prices in line with the rising fee it had to pay for the use of groundwater. 2. The distribution of water from the pumping station to the tap water production plant is done through water transmission pipelining laid underground in the areas belonging to certain agencies: the Department of Highways, the State Railway of Thailand, the Office of Royal Irrigation, and the Phra Nakhon Si Ayutthaya Land Office. Presently, BLDC has already been granted permission to utilize those areas for its pipelining at free of charge, by the four agencies for a period of 3-5 years (except for the Department of Highways from which the permission is required only during the construction). TTW and BLDC similarly clarified that such factor will pose very little effect as the pipelines have been laid underground and thus will not affect the ground level usage by the concerned agencies. In this projection, it is assumed that the company can renew the permission throughout the agreement period and the fee rates are adjusted based on the Consumer Price Index (CPI). However, if after expiry of the permission the agencies decline to grant a renewal or considerably increase the fees, the projected performance on the Operating Rights will then be affected. 3. As of the Operating Rights handover date, which is herein set to be September 2009, BLDC's waste water treatment capacity will have been improved and increased to 18,000 cu.m./day. 4. The Independent Financial Advisor have not included the risk factors mentioned in Item 2.4 - Risk Factors to make the Transaction in calculation of purchasing the operating right because the risks are still uncertain to happen or if they actually happen, it still question on when they happen, and it also could not value the exact price. In addition, the Company and BLDC clarify that the risk has low proability to occur. The financial projection here is intended for identifying the reasonable price of the Operating Rights at Bangpa-in Industrial Estate to be compared with the price approved by TTW Board of Directors at Bt. 1,400 million. Page 55 of the total 92 pages The Opinion Report of the Independent Financial Advisor The projection covers 30 years from September 2009 to August 2039, with the income and performance to be recognized in the first during September-December 2009 and in the final year during January-August 2039. However, should there be any effect from the economic condition and other external factors exerted on the operations and any material change from the assumptions, including any factor affecting the variables used for identifying the reasonable price, the price valuated herein will likely change as well. Besides, the valuated price may not be used as a reference price for any purpose other than that defined above. The key assumptions used for the price valuation on the Operating Rights are as follows: 1. Revenues from operations These consist of income from sales of tap water and income from waste water treatment services, as detailed below: 1.1 Income from sales of tap water The tap water in Bangpa-in Industrial Estate initially was supplied from groundwater wells and just in early 2009 has been developed to a surface water source. The tap water consumption volume at Bangpa- in Industrial Estate during 2005-May 2009 was as follows: 2005 2006 2007 2008 2009 (5 months) Water consumption (cu.m./day) 12,873 13,904 15,742 16,340 14,514 Growth rate 2.08% 8.01% 13.22% 3.79% -11.18% Source: BLDC In the first five months of 2009, the average consumption dropped to 14,514 cu.m./day due to the economic crisis hitting customers in Bangpa-in Industrial Estate in Q1/2009, prompting them to reduce their capacity utilization rate with the average water consumption falling to merely 13,853 cu.m./day. In Q2/2009, however, amid an economic recovery the said water consumption picked up to 15,108 cu.m./day and 15,859 cu.m./day in April and May respectively. For a conservative projection, the water consumption for 2009 is assumed to be 14,500 cu.m./day, which was the average over the first five months of 2009, and to increase after that based on the following assumptions: Type of customers Assumptions Customers already in Over 2010-2019, the water consumption is projected to grow by 3% per year, which is in line operations, covering 1,222.31 with the past average yearly growth rate recorded between 2005 and May 2009. After that, it rai* is expected to grow by a 0% rate until the end of the projection period. Customers under factory These customers are assumed to start operations in 2010. Some of them have already construction, covering 36.06 rai* informed BLDC in writing of their request for the tap water supply, which we found to be substantially higher than the average consumption. Therefore, for a conservative projection, we have based the water demand projection on the actual consumption per rai per day in 2008, which was 13.50 cu.m./rai/day or equivalent to around 487 cu.m./day. Thus, the water consumption is expected to be 240 cu.m./day in 2010 and rise to 480 cu.m./day in 2011, Page 56 of the total 92 pages The Opinion Report of the Independent Financial Advisor Type of customers Assumptions representing roughly 50% and 100% of the said projection respectively. During 2012-2019, it is projected to grow by 3% per year according to the above assumptions and then by 0% throughout the rest of the projection period. Customers already purchasing These customers are set to commence operations in 2012. Their water demand is projected the areas but not yet occupying based on the actual consumption per rai per day in 2008, which was 13.50 cu.m./rai/day or + spaces unsold, covering equivalent to around 1,743 cu.m./day. The water consumption is expected to be 520 129.14 rai* ,which comprise the cu.m./day in 2012 and jump to 1,740 cu.m./day in 2013, representing roughly 30% and 100% sold area of 82.58 rai that the of the said projection respectively. During 2014-2019, it is projected to grow by 3% per year customer have not utilized and according to the above assumptions and then by 0% throughout the rest of the projection unsold area of 46.56 rai* period. SPP project The project is expected to become operative in 2013 and its water demand will be constant at 2,000 cu.m./day throughout the projection period, which is the amount of water estimated for a power plant of 120 MV. Remark: * Data from BLDC as of June 2009 According to the drafted Operating Rights Agreement, BLDC agrees to provide the minimum off-take quantity guarantee over 2010-2012 at 15,513 cu.m./day, 16,429 cu.m./day, and 18,401 cu.m./day respectively. Therefore, if during such period the actual water consumption is lower than the minimum guarantee, BLDC will compensate for the income shortfall to the Company. The tap water fee is set to be Bt. 22.50/cu.m., which is the current applicable rate. The fee adjustment should in general be made yearly based on the growth rate of CPI so as to match the rise in expenses. According to the historical records of fee increases, the fee grew steadily over 2004-2006 by increasing from Baht 15 to Baht 22.50, with the latest fee adjustment made in July 2006. For a conservative projection, the fee rate will be raised by 7.50% every five years throughout the projection period, representing 50% of the total sum of the projected growth rate of expenses in a five-year period. The said growth rate of expenses applicable is 3%, based on the average growth in CPI over the past 30 years, which was 3.19% (source: Bank of Thailand). Thus, the projection of tap water demand and tap water fee during 2009-2039 can be tabulated below: 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020- 2039 Tap water demand 14,500 15,175* 15,863* 16,859* 20,569 21,126 21,700 22,291 22,900 23,527 24,172 24,172 (cu.m./day) Growth rate -11.3% 4.7% 4.5% 6.3% 22.0% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 0.0% Tap water fee 22.50 22.50 22.50 22.50 22.50 24.19 24.19 24.19 24.19 24.19 26.00 26.00 - (Bt./cu.m. ) 32.30 Page 57 of the total 92 pages The Opinion Report of the Independent Financial Advisor Remark: * : * The above demand for tap water are projected by the assumption of the Independent Financial Advisor. In the financial projection assume that BLDC must compensate for the income shortfall caused by an unmet MOQ in the following year according to the drafted agreement of the operating right. 1.2 Income from waste water treatment services The existing waste water treatment capacity is 12,000 cu.m./day. However, recognizing the growing tap water demand at Bangpa-in Industrial Estate, BLDC has decided to boost the said treatment capacity to 18,000 cu.m./day, which is expected to be complete by July 2009. Based on the general principle, IEAT has set the waste water quantity at 80% of the tap water consumption. In practice, however, the actual waste water volume is less than this because some customers have employed a water recycle in their manufacturing process. The waste water quantity discharged to the treatment process during 2005-May 2009 is shown below: 2005 2006 2007 2008 2009 (5 months) Waste water volume 9,271 10,085 11,545 11,816 10,754 (cu.m./day) Growth rate 2.11% 8.78% 14.48% 2.35% -8.99% Waste water as % of tap 72.02% 72.53% 73.34% 72.32% 74.09% water consumed Source: BLDC From the above table, the waste water amount makes up 72%-74% of the tap water consumed. In this study, therefore, the waste water quantity is projected to be 72.70% of the tap water consumption amount throughout the projection period, based on the average percentage of waste water to tap water consumed between 2005 and May 2009. Nonetheless, under the draft Operating Rights Agreement, BLDC agrees to provide a minimum waste water quantity guarantee at 11,480 cu.m./day, 12,157 cu.m./day, and 13,617 cu.m./day over 2010-2012 respectively, whereby BLDC shall indemnify the Company for any income shortfall caused by the actual incoming waste water being less than the guaranteed amount. For the SPP project, the waste water volume is expected at only 30% of the tap water consumption throughout the projection period, which is the amount as projected in the Technical Due Diligence Report, June 2009 Issue, prepared by EEC Engineering Network Co., Ltd. Such small amount of waste water is due to the fact that the tap water is largely used for steam production, leading the amount of waste water to be smaller than the average level. The treatment charge is presently Bt. 7-9/cu.m., computed from the BOD value of waste water discharged by customers, except for the waste water with BOD value exceeding the standard limit, which is charged at Bt. 20/cu.m. The average treatment charge during 2005-May 2009 is as follows: Page 58 of the total 92 pages The Opinion Report of the Independent Financial Advisor 2005 2006 2007 2008 2009 (5 months) Average treatment charge (Bt./cu.m.) 7.81 8.00 7.49 7.45 7.22 Growth rate 0.71% 2.52% -6.42% -0.51% -3.08% Source: BLDC As seen from the table, the average treatment charge is Bt. 7.22 - 8.00, which has been on a decline since 2006, demonstrating a better quality of the waste water discharged from customers' plants to the (more)