20130405-EARTH-AR2012-ENearth.listedcompany.com/misc/AR/20130405-EARTH-AR2012-EN.pdfIndonesia with rights of mining concessions in Indonesia. The head office address is located at

Energy Earth Annual Report 2012

12

Company Name: Energy Earth Public Company Limited (“Earth”)

Company Registration No: 0107538000240

Type of Business: Coal importation by utilizing its rights to various mining facilities

and concessions abroad aimed at distributing coal products to

customers from the domestic and international markets.

Registered Capital: Common Shares with value of Baht 3,027,615,570

Paid-Up Capital: 2,605,495,683 Common Shares at par value of Baht 1.00 per

share with the total amount of Baht 2,605,495,683.00 as of 31

December 2012

Head Office Address: 889 Thai CC Tower Floor 12 Room 125-12 South Sathorn

Road, Sathorn, Bangkok, Thailand 10120

Contact Details: Telephone: +66 (0)2673-9631-3

Fax: +66 (0)2673-9634

Website: www.energyearth.co.th

Investor Relations Contact Person: Dir. Thanawat Pratoomsuwan

Email: [email protected]

Other Investments: Earth holds 99.99% of the common shares of Energy Perfect Company

Limited (“Energy Perfect”) which has a registered capital of

Baht 200,000,000. Energy Perfect provides sorting and logistics

services to Earth’s customers, while distributing coal products

to customers in the domestic and international markets.

Energy Perfect has its own factory located 706/4 Moo1,

Nongkam, Sriracha, Chonburi.

Telephone: +66 (0)2673-9631-3 Fax: +66 (0)2673-9634

Other Investments: TRI TUNGGAL PITRIATI (“TTP”), a company registered in

Indonesia with rights of mining concessions in Indonesia. The

head office address is located at Banjarmasin, Indonesia. The

registered capital is Rp. 8,521,000,000 or the equivalent of

USD 1,000,000 and the shares held by EARTH is no more than

100% of the paid-up capital.

Company Information


13

Securities Registrar: Thailand Securities Depository Co., Ltd. Registrar

of Securities Department, Capital Market Academy 7 Floor 62

Ratchadaphisek Road Khlong Toei, Bangkok, 10110

Telephone: (66) 2229-2000, Fax: (66) 2654-5649

Auditor: Ms. WimolsriJongudomsombut

Certified Public Accountant Registration No. 3899

Karin Audit Company Limited

6 Fl., Room B1, Boonmitr Building, 138 Silom Road, Bangrak,

Bangkok 10500

Telephone: +66 (0)2634-2484-6 Fax: +66 (0)2634-2668


14

Marketing, Strategy, and Competitive Analysis

1. Competitive Strategy

1.1 Coal Sourcing and Supply Chain

Own mining is an essential target of our company because we need to change our

position from trading to miner. In 2011, Company Group has increased the registered capital

to purchase mines in Indonesia to secure supply for customers. With the reserved amount of

7.4 million tons in the purchased mines, Company Group can guarantee to deliver coal to

customers punctually as per contracts signed with customers. In 2012, the company sells

such coal for amount of 1.85 million tons and remains 5.5 million tons. In addition, all

supply in such mine already sold out. The company will deliver them on time based on the

contracts. The processes of own mining are as follows:

On 23 November 2012, Energy Earth PCL signed the Joint Operating

Agreement with East Star Company Limited

o Concession: East Star Company Limited acquires a coal concession

including area of 1,262 Rai at Dawei, Myanmar.

o Mining and Distribution: Energy Earth Company Limited is a mining

and distributive company

o Investment: Energy Earth Company Limited has its own

investment.

o Coal Reserve: At the beginning, the company expects to have at

least 40 million tons of coal reserve. Energy Earth Company

Limited will hire a Third party to do the job research and issue a

Joint Ore Reserves Committee (JORC). If this mine has a coal

reserve less than 40 million tons, East Star Company Limited will

seek other resource to cover the remaining.

o This mining operates by the joint operating agreement, so the

company does not pay any compensation to East Star Company

Limited. According to the joint operating agreement, the company

will be responsible for all operating expenses during these

transactions. The return will be divided as per the participating

interest ratio, which is the company being 70%, and East Star

Nature of the Business


15

Company Limited being 30%. The concession is expected to be

operational in March 2013.

On 21 December 2012, Board of Directors’ meeting of Energy Earth

Company Limited number 5/2012 approved to buy all of the common

shares of PT. HaryNiaga from their shareholders of not more than 1,000

shares and buying not more than 3,694,800 baht per share with the total

value of not more than 3,694,800,000 from HARY’s shareholders. A par

value is 1.00 baht per share of the private placement at the offering price

of 8.13 baht per share. The assets of HARY subject of the swapping of

shares will be the mineable coal reserves of not more than 40 million

tons at East Kalimantan, Indonesia. However, to ascertain the official coal

reserves, the Company has appointed an independent appraiser to

determine their accuracy, and produce the JORC (Joint Ore Reserves

Committee). The report should finish by the end of June 2013. The

number of shares to be swapped by EARTH to HARY will based on the

calculation of coal reserves by the independent appraiser. On the other

hand, the Company will register the increase of capital and enforce the

Extraordinary General Meeting of the shareholders No. 1/2013. The

General Meeting of the shareholders will consider and approve to

increase the capital for officially acquiring the mining.

Acquiring mine at this time can guarantee to our customers that the

Company Group has plenty coal reserve to deliver to our customers on

time.

In the trading section, the Company Group purchases products from other

mines. The Company Group always explores a quality of products in each

mine by hiring licensed professionals, who must have the technical

expertise to evaluate coal resources, carbon levels,moisture ratios, ash

levels, sulfur dioxide levels, and coal reserve of each mine. If such mine

passes a standard level, the Company Group will order products from its.


16

1.2 Relationship Management and Servicing

Company Group realizes the importance of sourcing and its key success for this type

of business. Company Group uses relationship managing policy to create good relationship

with mine owners in Indonesia. Such policy requires Company Group to send our employee

to cooperate with the mines to set complete preparation before each shipment. The

Company Group also has closer relationship with distributors so it helps to trade and deliver

products smoothly and conveniently under high quality products and services.

Our sales team and distributors have highly knowledge skills and expertise in coal

industry. They provide excellence services and advise to customers in the case that

customers have trouble using our products. Our executive directors often visit clients’ power

plant. On the other hand, we invite them to stop by our mine in Indonesia in order to

ensure our coal reserve and quality of products.

1.3 Production and Transportation

Company Group’s coal aggregating factory operates 24/7 days a week. Our

employees are always ready to take orders from customers daily and nightly, which result in

us being able to deliver coal according to customers’ need at all time. The Company Group

hires various trucking companies to support logistics 24 hours, and to reduce the risk of

relying too much on certain trucking companies.

The Company Group always sets up delivery plans with the international customers. We

have maintained good relationship with cargo ship routes. In our experience, the Company

Group always delivers products to ports or docks on time. In addition, the company has an

insurance to protect all damages, which can occur to products in any cases. We have been

never fined on delay delivery or damage products.

1.4 Customer Quality Speculation

Company Group has created customer database by speculating qualifications of

customers in both financial status and past payment results. Having a meeting, discussing

with customers directly, and consulting with others who are in the same field are parts of

the procedure to collect information before the credit term approval for each customer.

Most of the customers’ credit term is 30 days, only a very few customers whose credit term

is 45 days due to competitive conditions proposed by competitors.

1.5 Management within the Organization

Company Group uses online and modern communicating system to manage and

follow up works in every area. All employees must report working progress from product


17

transporting from Indonesia to delivering product to customers’ factories via online

communicating system set by Company Group. Such system will let every member of

Company Group know the working progress in every section related instantly.

1.6 Expanding market share to customers, who located nearby factories

Many industrial factories, who located nearby our factories Sriracha, Chonburi and

Nakornluang, Ayutthaya, use fuel oil or natural gas. The Company Group seeks an

opportunity to move into these factories because it helps to decrease logistic costs.

2. Competition and Industry Trends

2.1 Domestic Coal Industry Status

Import Volume:

The growing global economy has resulted in higher world market price for oil and

natural gas. Therefore, many industrial factories have decided to use boilers that can

consume coal as their fuel because coal is a good alternative energy. Its heating value is as

high as oil or natural gas and the cost is much lower when comparing by using price per

heating value (Baht per Kilo Calorie). From the table below, we mayfind that import volume

in 2012 is greater than in 2011 with the ratio of 63.37%.

Table Showing Thailand’s import in 2011 and 2012

Coal Volume (Metric

Tons)

Value (Million

Baht)

Price (Baht per

ton)

2011 2012 %

Change

2010 2011 %

Change

2011 2012 %

Change

Anthracite 210,701 138,063 -34.47 1,407 808 -42.57 6,678 5,852 12.37

Bituminous 4,484,690 7,326,828 63.37 13,077 19,864 51.90 2,916 2,711 7.03

Total 4,695,391 7,464,891 58.98 14,484 20,672 42.72 N/A N/A N/A

Source: Customs Department of Thailand


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Trends of Coal Industry

Coal demand in both domestic and world market still have a tendency to grow

continuously due to better global economy and higher oil price. Thailand currently has

approximately 7,000 industrial factories. If the price of oil and natural gas still remain high,

many factories may take chance to use coal as their energy source instead, which will result

in rapid growth of coal industry.

2.2 Trends of Coal Industry in the Global Market

Top Coal Exporters in the world

Source: Data from World Coal Association (2011 in Million Tons)

World coal export is increasing significantly. In 2011, Indonesia ranks as the number

one coal exporters in the world with 309 million tons per year, followed by Australia with

284 million tons per year, Russia, and the United States of America,respectively.


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Top Coal Importers in the World

Source: Data from World Coal Association (2011 in Million Tons)

World coal import is rising dramatically. In 2011, China is the number one coal

importer in the world with 190 million tons per year, followed by Japan with 175 million

tons per year. South Korea is ranked in Third and India is Fourth. Most of our products sell to

China and India, respectively. Japan and South Korea are our target market in the future.

Customer Characteristics and Target Customers

Company Group sells coal product both domestically and internationally with a ratio

of domestic customers to international customers at 16:84percent. Most of international

sales are distributed through traders, which dispose directly to the other international end

users. Some products are traded directly to power plants in China (end users) and the ratio

is increasing. Most domestic customers are bituminous coal users, which include small

factories to extremely large factories in various industries such as cement, paper, food, and

textile, etc…

Most of domestic customers are located on the East Thailand, including Chonburi,

Rayong, and other provinces around. Customers in Central and West Thailand locate near

our factories at SrirachaChonburi and Nakornluang Ayutthaya.


20

Main target customers are divided into two groups as follows:

End user: The Company Group sells products to various domestic factories such as

cement, paper, food, and textile, etc. The Company Group import large amount of

coal for sorting sizes out to meet customers’ need. Nowadays, the Company Group

deals with power plants in China directly. The Company Group signs a future contract

to sell 8.5 million tons of coal to a power plant in India within 3 years starting from

2013 and also plans to expand customers to other countries such as South Korea,

Taiwan, and Japan.

Trader: The Company Group has traders, who locate in international. Our sales

model disposes directly distributors from the port in Indonesia without sorting coal.

Seeking mines and coal supply:

Most of our mining is bituminous because it matches the customers’ need. The main

characteristic of candidate mines is the port location. The port should not far from the dock

in Thailand because it helps to save logistic costs. After choosing the candidate mines, the

Company Group will send out expertise to do a job report in order to test a quality of coal

in the laboratory and check a ability of drilling and maintaining coal from other

contaminates such as soil, sand, and rocks. In 2011, the Company Group acquired a mine by

swapping shares with PT. TRI TUNGGAL PITRIATI. Thus, the Company Group has 7.4 million

tons of coal reserve. In 2012, the Company Group signed the Joint operating Agreement with

the Eaststar Company Limited in Myanmar. Moreover, Board of Director approved to

purchase common stocks of PT. HaryNiaga, which has a coal concession in Indonesia in order

to increase the confidence on coal reserve.


21

Vision

“Becoming a coal industrial leader in Thailand and Asia with full supply-chain

management and supportive modern technologies, maintaining an international level of

service, environmental care, and stepping forward to the world class market”

Mission

Manage sufficient supply by searching for more mines each year for

customers’ satisfaction

Strive to be coal industrial leader for satisfaction of customers.

Create worldwide coal trading network both domestically and internationally.

Improve quality and service continuously.

Be creative and responsible for society and environment.

Corporate Culture

The Company defines 4 corporate cultures as follows:

1. 7 x 24: Ability to be work attentively regardless of time and Place

2. Speed of Thought: Execute accurate, precise, prompt decisions and

operations for any situations encountered.

3. Digital Nervous System: Perceive data and information effectively via

communication System and reflect or respond to the obtained information

promptly

4. Flat Organization: Consult, advice, and share opinions freely regardless or

positions and seniority.

Company Background

Energy Perfect Company Limited (EPCL) is founded on 5 January 2007 with paid-up

capital of 20 million Baht. ECPL imports Bituminous Coal from Indonesia to sort out into

requested sizes and sell to domestic and international customers.

EPCL’s current registered and paid up capital is 200 million Baht, with coal storing and

aggregating plant in Sriracha, Chonburi.EPCL sorts out coal and provides logistic services for

Company Structure


22

Energy Earth Company Limited. The company also distributes products to domestic and

international customers.

Summarized Background and Major Development of EPCL

2007 Founded on 5 January 2007, operated coal importing and distributing

business with paid-up capital of Baht 20 million.

April 2007, Sriracha plant was operational.

2008 September 2008, EPCL increased its registered capital to Baht 160 million.

2010 18 February 2010, EPCL increased its registered capital again to Baht 200

million.

On 13 December 2010, EPCL shareholders sold 99.99% shares to Energy Earth

Public Company Limited (former Advance Paint and Chemical Thailand Public

Company Limited) by swapping shares, which automatically make EPCL the

subsidiary of Energy Earth PCL (EARTH). The mentioned activity was

categorized as an indirect way of getting listed in the Stock Market (Back Door

Listing).

Summarized Background and Major Development of EARTH

2010 - On 2 December 2010, the Extraordinary General Meeting approved as

follows:

1. Acquiring common shares of EPCL in the amount of 20,000,000

shares, with price of 10 baht per share by exchanging shares

2. Increasing registered capital of 2,000,000,000 shares to allocate with

EPCL’s shareholders, price of 0.10 baht per share. As conditions on

acquiring EPCL’s common shares in amount of 20,000,000 shares at

exchange rate of 1 share of EPCL per 100 new shares of company, so

the company’s registered capital is 2,222,712,675 shares, with the

value of 1 baht per share and the company owns 99.99% of EPCL

shares.

3. Transferring assets, including lands, buildings, machines, and

equipment to pay off a creditor

- On 13 December 2010, the Company accomplished all agendas from

shareholders’ meeting resolutions successful which resulted in changes of the

Company’s structure as follows:


23

2011 - On 18 May 2011, The Stock Exchange of Thailand approved EARTH to resume

trading in MAI.

- On 15 September 2011, the Extraordinary General Meeting approved to

increase capital from THB 2,222,712,675 to THB 3,027,615,570, or an increase of

THB 804,902,895 with an issuance of 804,902,895 ordinary shares at a par value

of THB 1. The EGM approved the allotment of shares as follows:

1. The amount of 444,542,535 shares (Four hundred forty-four million five

hundred forty-two thousand five hundred and thirty-five shares) to support

the exercise of the Company’s warrant

Before the Structural Change Structure (After 8 December 2010)

EARTH’s Existing

Shareholder

Advance Paint and Chemicals

(Thailand) Public Limited

Company (APC)

EARTH’s Existing

Shareholders

EPCL’s Existing

Shareholders

Energy Earth Public Company Limited

(EARTH)

Energy Perfect Company Limited

(EPCL)

100.00%

10.02% 89.98%

99.99%


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2. The amount of 331,457,770 shares (Three hundred thirty-one million

four hundred fifty-seven thousand seven hundred and seventy shares) of the

capital increased ordinary shares for private placement for PT TRI TUNGGAL

PITRIATI’s existing shareholders

3. The amount of 28,902,590 shares (Twenty-eight million nine hundred

two thousand five hundred and ninety shares) to support the exercise of the

Company’s warrant regarding of the future amendment of the warrant

TTP’s Existing

shareholders

Energy Earth PCL

(EARTH)

Energy Perfect Co., Ltd.

PT. TRI TUNGGAL

PITRIATI (TTP)

87.02% 12.98%

99.99%


25

Exercise Price per 1 share (THB) =1.466

Exercise Ratio (warrant: share) 1 : 1.023

First day of exercise 15 March 2012

Last day of exercise 15 September 2012

- Energy Earth PCL signed the Joint Operating Agreement with East Star Company Limited to

operate a coal mine that expect coal reserve at least 40 million tons in

Myanmar. The company does not pay any compensation to East Star

Company Limited. The operation is expected to start in 2013.

- On 21 December 2012, Board of Directors’ meeting allowed the

Extraordinary Generally Meeting to consider these following on 30 August

2013:

(“HARY”), which is a company registered in Indonesia has a concession

type Izin Usaha PertambanganEksplorasi (“IUP Exploration”) from the

Government of Indonesia to mine coal in Indonesia. HARY will receive

payment by swapping shares.

capital without

paying in cash for warrant (EARTH-W4). The ratio is 3 ordinary shares to

1 warrant without a charge of payment. Thus, 1 unit of warrant will be

entitled to purchase 1 newly-issued ordinary share at an exercise price

of 8.13 baht per share during a period of not more than 2 years as

seen in EARTH-W4.

Company's registered capital from THB 3,027,615,570 (THB

2,605,495,683 paid) to THB 4,500,000,000 by an issuance of no more

than THB 4,500,000,000 new ordinary shares at the par value of THB

1.00. These shares would offer to a private placement in order to buy

HARY’s stock without cash payment.


26

2013 - On February, the company was listed in Frankfurter Wertpapierborse (FWB®,

the Frankfurt Stock Exchange) as secondary listing.

Summary of PT. TRI TUNGGAL’s Background and Development

PT. TRI TUNGGAL PITRIATI registered in Indonesia on 17 December 2007 as CV.

TRI TUNGGAL MANDITI (Partnership), changed to PT. (equals to Company Limited) and

changed the name to PT. TRI TUNGGAL PITRIATI on 27 December 2010

Currently, PT. TRI TUNGGAL PITRIATI has paid-up capital the amount of USD

1,000,000 (about Baht 29.81 million), has 1 coal mining concession with the reserve

amount of 1.80 million tons, and 1 coal mining exclusive rights with the reserve

amount of 5.60 million tons. The 2 mines together have approximately 7.40 million

tons and the Company’s main office is located at Banjarmasin, South Kalimantan,

Indonesia. In 2012, PT TRI TUNGGAL PITRIATI drills approximately 1.85 million tons from

such mine.

Overall Business of the Company and Subsidiaries

The Company imports Bituminous Coal from Indonesia to domestic and

international customers by sourcing through coal mines of Company Group in

Indonesia through TTP, whose 99.99 of shares are held by the Company and through

trading with other mine owners in Indonesia through EPCL, whose 99.99% of total

shares are also held by the Company. The Company is then able to deliver goods to

customers via vessels conveniently. Some of the Coal shall be sold to foreign

customers directly while the rest are transported to Thailand to aggregate sizes for

needs and requirements of domestic customers. Most international customers are

traders and large power plants (End User) in China. Most domestic customers are coal

consumers whose factories are located nearby our plant in Sriracha, Chonburi and also

storage areas, which are located in NakhonLuang, Ayutthaya. Their industrial factories

consist of small, medium, large industries and power plants that have high demand of

coal consumption as energy generator. Company Group’s main customers are

cement, paper, textile, and food industrial groups, etc.


27

Share Holding and Business Structure of Company

In the business structure, Company Group purchases products from Indonesia.

Then, EARTH distributes products to both domestic and international clients, while

EPCL is in charge of selling to only international customers as well as sorting coal sizes

for domestic customers. Moreover, TTPL responds for coal mining and sell to EARTH

and EPCL.

Revenue Structure from Coal Sales

Revenue structure from coal sales in the past are as follows:

Revenue Type

2009 2010 2011

Baht-

Million

% Baht-

Million

% Baht-

Million

%

Revenue from coal sales

Domestic 330.62 18.84% 926.65 19.78% 1,649.95 15.86%

Foreign 1,424.62 81.16% 3,758.47 80.22% 8,756.33 84.14%

Total revenues 1,755.24 100% 4,685.12 100% 4,685.12 100%

Energy Earth Public Limited

Sell coal to domestic and international customers

Energy Perfect Company Limited

Import, sizing, and sell to

domestic and international

customers

Purchase and distribute products

to international customers

PT TRI TUNGGAL PITRIATI

Coal mining and export to EARTH and

EPCL

99.99%


28

In 2010, the Company Group paid closer attention to do marketing on

customers who are direct customers to reduce risks of relying on a few very large

customers and to ensure continuous growth of the Company, which resulted in an

increase of domestic sales revenue. However, the international sales revenue is also

increased along with the domestic sales revenue.

In 2011, the Company Group expanded customers both domestically and

internationally. Because of the Oil market crisis, coal was chosen as a primary

alternative energy which resulted in the Company Group’s 166.92% increased revenue

from the year 2010

In 2012, Company Group is very successful on expanding business

internationally. Most international customers are power plants in China and new clients

in India. Moreover, the Company Group rapidly increases domestic customers so the

sales are increasing 122.11% from 2011.

Company’s Goal

In 2012, the Company Group sets the mission as “5 years, 5 mines, and 5

countries.” The Company Group must have at least five mines in the next five years

and each mine has to have approximately 30-40 million tons of coal reserve.

In 2011, the Company Group acquired coal mine in Indonesia with 7.4 million

tons of coal reserve. In November 2012, EARTH signed the Joint Operating Agreement

with Eaststar Company Limited to operate a coal mine in Myanmar with the expected

coal reserve of 40 million tons. In December 2012, Board of Directors considered and

approved to purchase common stocks of PT. HaryNiaga (“HARY”), which is an

Indonesian company by swapping shares. In addition, the Company also aims to

purchase more mines to ensure more security to the Company and customers, and

has enough coal reserve to make the commitments.

The Company Group pays close attention to logistics process. The Company Group

has chosen high standard logistics companies to cooperate with in order to enhance

the product’s quality and punctuality.

The Company Group gives close heed to customers. Our targets are not only reliance on

major customers. We have expanded sales to other customers in order to reduce risks from

reliance on major customer. Moreover, the Company Group also plans


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The Company Group aims to focus on certain quality of product by aiming to

cooperate with power plant groups and coal users.

1. Risk from coal supply for sale

In coal business, one of the most important factors is sourcing ability, which has the

following risks:

1.1 Risk from reliance on Indonesia suppliers

The Company Group’s total sales were 5.44 million tons last year from our own

mining. The remaining was ordered from Kalimantan or Borneo, Indonesia only because it

had plenty of bituminous that could be used in the next ten years. In addition, Kalimantan is

not far from Thailand so we can slash other competitors. However, Indonesia sometimes

encounters with weather conditions, so the Company Group might have enough supply.

Fortunately, Kalimantan has never ever suffered with a violent natural disaster since 2007.

Kalimantan’s total area is approximately 0.58 million square kilometres, while Thailand’s

total area is approximately 0.51 million square kilometres. Thus, the possibility of natural

disaster is very small. On November 2011, the company signed the Joint Operating

Agreement with Eaststar Company Limited for mining bituminous in Dawai, Myanmar. The

Company imports coal for distributes in domestic. Moreover, we are planning to sell to India

by second quarter of 2013. This mine helps to reduce risk from reliance on major suppliers.

1.2 Risk from reliance on major customer

Most of coal trading in Indonesia deals with brokers and/or directly owners. However,

purchasing products from brokers are more expensive than from owner. However, buying

from brokers has some advantages. For example, they can provide either credit lines or

letter of credit (L/C), while owners accept cash only.

In order to reduce such risk, the Company Group acquired the mine in Indonesia by

swapping shares with PT. TRI TUNGGAL PITRIATI since 2011. The Company Group has 99.99%

shareholding. The coal reserve is 7.4 million tons. In 2012, the Company Group signed the

Joint Operating Agreement with Eaststar Company Limited for mining in Myanmar. The coal

reserve should not less than 40 million tons. Thus, the Board of Directors approved to buy

whole common shares of PT. Hary Niaga, which had a concession. Total of our coal reserve

is approximately 70- 80 million tons, which support the demands in the next ten years. We

are planning to acquire more mines in order to follow our mission, which is 5 years, 5 mines,

and 5 countries.

Risk Factors


30

1.3 Risk from transporting and shipping by sea

Company Group imports its coal supply from Indonesia and oceanic shipping is

adopted for transporting. Oceanic shipping consists of some risks including lack of barge,

natural disasters and loss of coal during transfer at substandard port.

Oceanic disaster may cause major damage to barges and coal. To prevent such event,

Company Group has set a highly standard for quality and integrity examination of

barge along with insuring for natural disaster during shipping.

The port standard is crucial for oceanic shipping. Company Group concerns for

every process of transportation including transferring at port. Company Group selected

standardizes port and deploy its agent to the port for controlling the standard and

reducing the transferring time. Moreover, the Company Group has a strategy to

purchase yearly coal in advance and maintain products in safely warehouse. Thus, we

have plenty of products to meet customers’ satisfaction.

1.4 Risk from domestic transportation

Our businesses are reliable on transportation facilities and fluctuations in

transportation costs in order to supply coal to customers. The company depends upon

truck transportation systems and we do not own a transportation company. However, the

Company Group has high volume, so we have a power to negotiate with major logistic

companies, which have capability and honest. The Company Group can manage shipping

costs and also supply them with gasoline/diesel. Thus, we have never encountered with

these risks.

1.5 Risk from changes in politics and Laws in Indonesia

In 2011, the Company Group had purchased a coal mine in Indonesia by share swapping

method with PT. TRI TUNGGAL PITRIATI which is a foreign company registered in Indonesia.

We must follow the Indonesian law such as DMO (Domestic Market Obligation) which was

publicly used since 31 December 2009. Such law states domestic and international sales

ratio in Indonesian coal mines. However, this law hasn’t had any effects with the Company

Group because domestic sales usually uses market price. The Company Group also has

excellent relationship with local Indonesians which make it easier for us to make

appropriate adjustments with such new laws.

Government regulation of the Republic of Indonesia Number 24 year 2012

Article 97 stated that foreign capital investment must divest its shares gradually within

5 years of production. The ownership of Indonesian participants in each year after the


31

end of the fifth year as of its production shall not be less than the following

percentages:

Sixth year 20 percent

Seventh year percent

Eighth year 37 percent

Ninth year 44 percent

Tenth year 51 percent of the total shares

Within ten years, foreign companies could not own more than 49%. Company’s

strategies are seeking coal mines that each mine has approximately 40 million tons in order

to operate within 10 years before company’s share less than 49%.

2. Risk from new competitors

Importers and exporters of coal business tend to increase because oil and gas price

uptrend causes coal to be a replacement source. Increasing of competitors would obviously

affect Company Group business.

Although, there is a trend that new competitors will enter into the business, but there are

some important supporting factors for a business to success such as the ability to procure

quality of coal for sell. Even when new competitors can be able to procure coal; most

procurement would be through brokers who result in higher purchased price and inability to

control coal quality. Many new entrepreneurs do not successful in this industry because of

many reasons. They are lack of experience and buy products from brokers, which cost

higher than other competitors.

New competitors will have to compete with the existing coal business companies to

ravish market share. Good relationship and trust between existing companies, customers,

and suppliers would be the major barrier for new competitors to sell its coal to the existing

customers. Lower price strategy will not be an advantage for new competitors because of a

higher purchase coal price from broker. Nowadays, we have our mines, so we can reduce

the risk from new competitors.


32

3. Risk from price fluctuation of coal

According to the chart above, coal prices were decreasing sharply in second

quarter of 2012, so it affected the coal prices. The Company Group sets up policies

about coal prices based on capital plus margins. Thus, these policies help to reduce

the risk of price fluctuation. However, the global coal consumption trend is increasing

because of the world economic expansion. The Company Group has an inventory

levels amount to approximately four months. Thus, the Company Group has 7.4

million tons of coal consumption. In 2011 – 2012, the Company Group signed the

Joint Operating Agreement with the Eaststar Company Limited. In addition, the Board

of Directors approved to acquire PT. Hary Niaga, which has a concession in Indonesia

and observes approximately 30-40 million tons.

4. Risk from environmental impacts and community protest

4.1 Affecting areas near industrial factories or power plants

Coal is classified into four main ranks, included lignite, subbituminous, bituminous, and

anthracite, depending on the amounts and types of carbon it contains and on the amount

of heat energy it can produce. The chart is shown below:

Types of Coal Heat Energy moisture Ash Sulfur dioxide

Anthracite High Low Low Low

Bituminous High Low Low Low

Subbituminous Moderate - High Moderate Moderate Moderate

Lignite Low - Moderate High High Low - High

Source: Ministry of Energy website


33

Whenever coal is burned, the sulfur in coal combines with oxygen to form sulfur

dioxide, which can be a major source of air pollution and harmful to humans. According to

the chart, lignite has the highest sulfur, so it is unpopular for using in factories. On the other

hand, the Company Group distributes bituminous coal, which produces low sulfur dioxide.

Today, boiler technology has been reduced the quantity of pollutants resulting from coal

combustion significantly. Thus, risk from affecting area near industrial factories and power

plants are low.

4.2 Affecting area near sorting out factories

Sorting and storing coal can cause an environmental impact. The Company Group

controls and solves these problems by building grate around the factories and warehouses.

The Company Group also set up several sprinkle to help catch up dust. In addition, the

Company Group has a good relationship with communities and hires them to work in our

factories.

Chao Praya Surasak Municipality issues a sorting license to our company since 2007 and

the license has to continue every year. In 2012, we already received the license.

5. Risk from Financial Factors

5.1 Risk from foreign exchange rate fluctuation

Coal import from Indonesia is purchasing in United States Dollar. In 2010-2012, revenue from

coal sell in Thai Baht is in ratio of 35.45%, 17.95% and 15.85% of total revenue sales

respectively. Foreign exchange rate fluctuation is, therefore, one of the risks that will

certainly affect the operation of Company Group. Since 2010-2012, the Company Group has

been made a profit from exchange rate with a ratio of 33.80, 15.98, and 29.37 million baht,

respectively.

Nowadays, financial institution has approved foreign exchange forward contract facility to us.

The Company Group have never utilized such facility because coal sell portion which

settled in United States Dollar could, at some level, hedge the fluctuation of foreign

exchange rate resulting from raw material purchasing which settled in United States Dollar.

However, if foreign sell portion decreases, the Company Group would be able to utilize the

approved forward contract in appropriate amount to mitigate this risk. Management of

Company Group continuously follows exchange rate movement and could utilize the

forward contract appropriately.


34

Major Shareholders’ names that appear in the share register book as of 31 December

2012

Name No. of Shares %of paid-up capital

1. Phihakendr Family Group 1/ 1,246,380,503 47.84

2. Khamdee Family Group 2/ 311,299,501 11.95

3. UBS AG HONG KONG BRANCH 100,000,000 3.84

4. Dechavibul Family Group 3/ 76,570,404 2.94

5. Ittiwittayathorn Family Group 4/ 70,247,000 2.70

6. Thai NVDR Company Limited 69,777,367 2.68

7. Mr. MaethaRungsiyawaranont 20,271,600 0.78

8. Mr. SakrapolChatmongkollert 19,832,200 0.76

9. DEUTSCHE BANK AG SINGAPORE-PWM 18,447,978 0.71

10. Mr. SurachaiAnsirimongkol 16,731,600 0.64

11. Other Shareholders 655,937,530 25.18

Total 2,605,495,683 100

1/Phihakendr Family Group consists of

Name No. of shares % of paid-up

capital

1. Mr. Phisudhi Phihakendr 154,942,950 5.95

2. Mr. Phiroon Phihakendr 309,885,901 11.89

3. Mr. Phipat Phihakendr 309,885,901 11.89

4. Mr. Phiboon Phihakendr 309,885,901 11.89

5. Mrs. VoranuchPhihakendr 154,942,950 5.95

6. Mr. Piriya Phihakendr 6,836,800 0.26

Total 1,246,380,503 47.84

Major Shareholders


35

2/ Khamdee Family Group consists of

Name No. of shares % of paid-up

capital

1. Mr. Khajohnpong Khamdee 309,885,901 11.89

2. Mr. Wisit Khamdee 100,000 0.00

3. Mr. Amnuai Khamdee 1,198,600 0.05

4. Ms. Kawisra Khamdee 100,000 0.00

5 Ms. Vilaiporn Khamdee 15,000 0.00

Total 311,299,501 11.95

3/Dechavibul Family Group consists of

1. Mr. KritsakornDechavibul 75,970,404 2.92

2. Mrs. RoongnapaDechavibul 600,000 0.02

Total 76,570,404 2.94

4/IttiwittayathornFamilyGroup consists of

Name No. of shares % of paid-up capital

1. Ms. KarnchanaIttiwittayathorn 44,700,000 1.72

2. Ms. ViyadaIttiwittayathorn 25,547,000 0.98

Total 70,247,000 2.70


36

Dividend Policy

The Company has a policy to pay out dividend off at least 40% of its net profit

after deducting other reserves as per the Company’s Articles of Association and

governing law. This dividend payment is only made if there are no other financial

needs by the company and the payment does not significantly affect the Company’s

normal operating activities.

The subsidiary company has a policy to pay out dividend to shareholders according to

the Company, in which the subsidiary’s board of directors shall together consider the

dividend based on its performance, investment plans, needs and other suitability that

the board of directors have agreed on.


37

1. Organization Chart

2. Management Structure

Management structure of Energy Earth Public Company Limited is consisted of 3

committees including The Board of Directors, Audit Committee, Board of Executive Directors

and Managing Director. And for Energy Perfect Company Limited, the management structure

is consisted of The Board of Directors and Managing Director. Details of which are as follows:

2.1 Board of Directors

(1) Energy Earth Public Company Limited

The Board of Directors consists of 13 directors as follows:

Name Position

Mr. Phisudhi Phihakendr Chairman

Mr. Parada Bunnag Vice Chairman/Independent Director

Mr. Khajohnpong Khamdee Director

Mr. Phiroon Phihakendr Director

Management Structure

Board of Directors

Executive Committee

Managing Director

Deputy Managing Director

Internal Audit

Audit Committee

AMD Production

AMD Finance andAccounting

AMD Sales and International


38

Mr. Phipat Phihakendr Director

Mr. Phiboon Phihakendr Director

Ms. Kanchana Chakvichitsopon Director

Mr. Thanawat Pratoomsuwan Director

Mr. Nugoon Sri-in Director

Mr. SomkiatSukdheva Independent Director/Chairman of the

Audit Committee

Mr. Suriyaporn Bunchai Independent Director/Audit Committee

Mr. EknarinThammaraks Independent Director/Audit Committee

Mr. Thongchai Waatanasoponwong Independent Director/Audit Committee

Authorized Directors to sign on behalf of the Company

The authorized directors are Mr. Khajohnpong Khamdee, Mr. Phiroon Phihakendr, Mr.

Phipat Phihakendr, Mr. Phisudhi Phihakendr, Mr. Phiboon Phihakendr, Ms.

KanchanaChakvichitsopon, Mr. Thanawat Pratoomsuwan, and Mr. Nugoon Sri-in. Two of

eight committees need to countersign and affix the company’s seal.

Duties and Responsibilities of the Board of Directors are as follows:

1. The Board of Directors has authorities and responsibilities according to the

association of company which are defined to be of the Board of Directors.

2. The Board of Directors have authorities and duties to establish important

policies of the Company as follows:

2.1 Business conduct policy

2.2 Financial policy

2.3 Funding policy

2.4 Funds management policy

2.5 Risk management policy

3. The Board of Directors has authorities and duties for the Company investments as

follows:

3.1 Consider and approve budget plans

3.2 Consider investment plans of the Company

3.3 Supervise and manage projects to establish as planned.

4. The Board of Directors has authorities and duties to supervise and manage the

Company’s performance to:


39

4.1 Ensure that the Company’s performance shall be established as

planned.

4.2 Set resolutions in the case of problems and troubles to achieve the

planned goals or better.

5 The Board of Directors have authorities and duties to establish general

information and financial reports to shareholders and investors accurately

and in accordance with regulation of laws.

6 The Board of Directors have authorities and duties to acknowledge the

important report of the Audit Committee or Internal Audit, as well as Auditor

and the Company’s consultants. The Board of Directors is required to

establish resolutions in the case of significant defects found.

7 The Board of Directors has authorities and duties to collate sufficiency and

appropriation of the internal control and risk management of the Company.

8 The Board of Directors has authorities and duties to establish high level

management structure and the Company’s succession plan.

9 The Board of Directors have authorities and duties to appoint Audit

Committee and establish authorities and responsibilities of the Audit

Committee.

10 Appoint one of the directors or many of the directors or other individuals to

act on behalf of the Board of Directors. For the delegation, the delegated

individuals must not have authorities to approve items which involve such

individuals or individuals who may have conflicts of interests with the

Company and its subsidiaries.

Exception for the followings can be made only upon approval by the

shareholders’ meeting. If committees or connected persons are related to the

transaction that may create any conflicts of interests with the Company, the related

committees are not permitted to vote on that transaction.

• Act that the law requires the resolution of the shareholders’

meeting. Transaction that involves a committee who may have conflicts

of interests, or required by laws or regulations of the Stock Exchange of

Thailand to have approval of the resolution of the shareholders’

meeting.


40

• The following events must be approved by The Board of

Directors’ Meeting and the shareholders’ meeting with a three-quarter

(3/4) vote of eligible shareholders present at the meeting.

- The sale of transfer of the whole of important parts of the business.

- The purchase or acceptance of transfer to other companies or private

companies.

- The signing, amending or terminating of contracts with respect to the

leasing of the whole or important parts of the business, the assignment of

the management of the business of the company to other persons or

business merger/acquisition with the purpose of profit and loss sharing.

- The amendment of memorandum of association or articles of

association.

- The increase of decrease in capital.

- The merger/acquisition and wind up of the Company.

Others that are required by laws


41

Details of Directors and Management as of 31 December 2012

No. Name/Position Age Education Relationship

with

Executives

Shares

holding in

Company

(%)

Working Experience within 5 years

Time

Period

Position/Company

1. Mr. Phisudhi

Phihakendr

Chairman

62 Undergraduate

Business

Management

University of

Memphis

Father of Mr.

Phiroon

Phihakendr, Mr.

Phipat

Phihakendr and

Mr. Phiboon

Phihakendr

11.89 2011 –

Present

Chairman

PT. TRI TUNGGAL PITRIATI

2011 –

Present

Director

WTEC Co., Ltd.

2010 –

Present

Chairman

Energy Earth Public Company

Limited

2007 –

Present

Chairman

Energy Perfect Company


42

Limited

2007 –

Present

Director

Energy Mining Company

Limited

2006 –

Present

Director

Snack Shack Company Limited

2. Mr. ParadaBunnag

Vice Chairman and

Independent

Director

50 Undergraduate

Management

Western Michigan

University

- - 2010 –

Present

Vice Chairman/Independent

Director


Limited

1993 –

Present

Director

D. BunnagChromiam Plating


43

Co., Ltd

1993 –

Present

Director

Brother Auto Parts &

Engineering Co. ltd.

3. Mr. Khajohnpong

Khamdee

Director

41 Undergraduate

Accounting

Rajabhat

Rajanagarindra

University

- 11.89 2011 –

Present

Director


2010 –

Present

Exectutive Director


Limited

2008 –

Present

Director

WTEC Co., Ltd.

2007 –

Present

Managing Director


Limited


44

2007 –

Present

Director


Limited

4.

Mr. Phiroon

Phihakendr

Director

36 Master

Computer Science

New York University

Undergraduate

Computer-Science

New York University

Son of Mr.

Phisudhi

Phihakendr

11.89 2011 –

Present

Director

Zinneken’s Co., Ltd.

2010 –

Present

Director


Limited

2008 –

Present

Director

MM Alliance Co., Ltd.

2007 –

Present

Director



45

Limited

2007 –

Present

Director


Limited

2007 –

Present

Director

Upsara Valley Winery Co., Ltd.

2005 –

Present

Director

Bangkok Beer & Beverage Co.,

Ltd.

2003 –

Present

Director

WTEC. Co., Ltd.

5. Mr. Phipat

Phihakendr

34 Master

Management

Son of Mr.

Phisudhi

11.89 2011–

Present

Director



46

Director

University of

Southern California

Phihakendr 2010–

Present

Director


Limited

Undergraduate

Music Industry

University of

Southern California

2007 –

Present

Director


Limited

2007 –

Present

Director


Limited

2003 –

Present

Director

WTEC Co., Ltd

2008 –

2010

Market Development Manager

Coca-Cola (Thailand) Ltd

6. Mr. Phiboon 29 Master Son of Mr. 11.89 2011 –

Present

Director



47

Phihakendr

Director

Linguistics

Fudan University

Undergraduate

Music Composition

California Institute of the Arts

Phisudhi

Phihakendr

Limited

2010 –

Present

2010-

2010

Director


Limited

General Manager


Limited


48

7. Ms. Kanchana

Chakvichitsopon

Director

61 Undergraduate

Economics

Chiangmai University

-

0.23

2010 -

Present

Director


Limited

2007 -

Present

Executive Director


Limited

8. Mr. Thanawat

Pratoomsuwan

Director

42 Master

Public Administration

National Institute of

Development

Administration

Undergraduate

Business

Management-

- 0.15 2012 -

Present

2010 –

Present

1994 -

Director


Limited

Director


Limited


49

Marketing

University of the Thai

Chamber of

Commerce

2010 Team Manager

Kasikornbank

9. Mr. Nugoon Sri-in

Director

56 Undergraduate

Mechanical

Engineering

Saint Louis University

Philippines

0.29 2011 -

Present

Director


Limited

2011 -

Present

Director



50

10. Mr. SomkiatSukdheva

Chairman of the

Audit

Committee and

Independent Director

68 Master

Management

Sasin of Chulalongkorn

University

- - 2011 -

Present

Chairman of the Audit

Committee and Independent

Director


Limited

2002 –

Present

Chairman of the Nomination

Committee, Chairman of the

Remuneration Committee, and

Director of Audit Committee

Thanachart Capital Public

Company Limited

Undergraduate 2003 –

Present

Chairman of

Korvac (Thailand) Company


51

Economics

Thammasat

Universtiy

Diploma

High Management-

Advanced Audit

Committee Program

Class 7/2012

Limited

2006 –

2009

Chairman of Thaimart Land

Company Limited (name

changed to Thaimart Retails

Group Company Limited

2002 –

2008

Director, Chairman of Audit

Committee, Executive Director

NakhonLuang Thai Bank Ltd.

(name changed to Scib, PCL)

11. Mr. Eknarin

Thammaraks Audit

Committee and

Independent

Director

36 Undergraduate

Business Science

Professional Tennis

Management

Ferris State University

- - 2011–

Present

Director

Zinneken’s Co., Ltd.

2011–

Present

Director

Miceman Company Limited


52

2011–

Present

Director

Miniature Gallery Partnership

Ltd.

2010 –

Present

Audit Committee /

Independent

Director


Limited

2010–

Present

Director

BeccofinoTrattoria(Chiangmai)

2007–

Present

Director

International Travel

Consultants

2005–

Present

Director

Lampang River Lodge Hotel Co,


53

Ltd.

2005–

Present

Director

The Legend Resort & Spa Co,

Ltd.

2005–

Present

Director

Hmong Hilltribe Lodge Co, Ltd.

12. Mr. Suriyaporn

Bunchai

Audit Committee and

Independent

Director

44 UndergraduateaccountingRamkhamhaen

g

University

- - 2010–

Present

Audit Committee /

Independent

Director


Limited

2005–

Present

Owner of

Bunchai Net and Com

13. Mr. Thongchai

Watanasoponwong

35 Master

Computer Science

- - 2010–

Present

Audit Committee /

Independent


54

Audit Committee and

Independent

Director

The George

Washington University

Undergraduate

Electrical Engineering

Thammasat

University

Director


Limited

2010–

Present

Director

Choomporn Ice Company

Limited

2008–

Present

Business Director

IBM Thailand Company Limited

14. Mr.

PaiboonAssawasiriwo

ng

Assistant Managing

Director

39 Master

Business Administration Assumption

University

Undergraduate

Business Administration

- 0.08 2010–

Present

Assistant Managing Director


Limited

2008–

2010

Assistant Managing Director


Limited


55

Remark: Includes common shares held in trust

Thammasat

University

2007 -

2008

Lecturer,

Burapha University

2003 -

2007

Managing Director

Venture Plus Co., Ltd.

2000 -

2003

General Manager,

WinStore Co., Ltd.

1995 -

2000

Area Sales Manager,

Tri Petch Isuzu Sales Co., Ltd.


56

4. Compensation for Management

The Board of Directors Meeting No. 1/2012 held on 28 February 2012 resolved to

define compensation for Board of Directors, Audit Committee and Board of Executive

Directors for the year 2012 as follows:

(1) For collating financial statements quarterly

Committee Compensation (Baht per 1

Appearance)

Chairman 60,000

Vice Chairman 50,000

Director and Independent Director 20,000

Company Secretary 10,000

Chairman of the Audit Committee 60,000

Audit Committee 30,000

Secretary of the Audit Committee 30,000

(2) For other meetings for different agendas, compensation rate is Baht 10,000

per one person / one appearance.

(3) Executive Directors receive Baht 20,000 per month.

(4) Compensate traveling cost for directors who leave in other provinces that are

not Bangkok.

(5) The Annual General Meeting of the year 2012 held on 30 April 2012 had

resolved in defining compensation for the Company’s Board of Directors,

Audit Committees and Executive Directors for the year 2012. The total value

is no more than 5 million Baht per the year 2012.

Compensation in 2012 is total of 3,560,000 baht as follows:

Items 2012

Compensation details Baht

Directors Meeting Compensation 1,460,000

Audit Committees Meeting Compensation 660,000

Executive Directors Remuneration 1,440,000


57

Total 3,560,000

5. Corporate Governance

The Company is committed to the good corporate governance (Code of Best Practices) to

apply in the Company’s operation for the benefit and transparency of the Company

business, as well as enhance effectiveness of management team, which will create

confidence in shareholders, investors and all related parties. Good corporate governance is

categorized into 5 principles as follows:

5.1 Rights of Shareholders

The company values the importance of shareholders’ right, therefore, the company

assures that company’s shareholders shall have the same basic right, namely rights to buy,

sell, or transfer shares, rights to obtain adequate information, rights to participate and vote

in the shareholders’ meeting on significant issues and rights to share in the profits of the

company.

The details are as follows:

1. The Company holds Annual General Meeting yearly, each year within 4

months after the end of accounting period, sends meeting notices and

agendas to shareholders 7 days before the meeting day and announce in

newspaper 3 consecutive days no less than 3 days before the meeting day.

Each agenda shall also have opinions of the Board of Directors

2. The Company regularly disseminates information to shareholders via The

Stock Exchange of Thailand’s channel, media and publications, including its

website.

3. In the case that shareholders cannot attend the meeting themselves, the

Company shall let shareholders give proxies to independent directors or

individuals to act on behalf of them. This is to support voting rights of

shareholders and can be done by using proxy that the company attaches

with the invitation letter.

4. Before the meeting, shareholders may send comments, opinions and

questions via email addresses of investor relation and secretary of the

board.

5. In the meeting, The Company allocates a suitable period of time for the

meeting, conducts each meeting suitably and transparently, allowing


58

through expression of views and queries before each ballot round and

summarizes meeting resolutions on each agenda. If the shareholders have

inquiries about certain areas, the Company shall provide suitable specialist

to answer all questions under responsibilities of the Board of Directors.

6. All directors attend each shareholder meeting. Directors are required to

address relevant questions and concerns, posed by shareholders (if any).

5.2 Equality Treatment of Shareholders

The company values and treats all shareholders fairly through the following

actions:

1. Conduct and facilitate all shareholders equally and do not take any actions

that restrict or violate rights of shareholders.

2. Determine the right to vote in the meeting according to number of shares

held by shareholders, one share equals one vote.

3. Ensure that independent directors are responsible for minor shareholders’

rights. Minor shareholders may state opinions or complaints to

independent directors and independent directors will review considerately

in each case. If they are complaints, independent directors shall perform

speculation and strive for best resolutions. If they are opinions and

independent directors agree to their importance to overall stakeholders or

the Company, independent directors shall propose such matters to the

shareholders’ meeting to consider and state in agendas of the shareholders’

meeting.

4. Establishing the Board of Directors’ measurements to control the usage and

prevent the misuse of internal information (insider trading) for personal

benefit of concerned persons, including the Board of Directors, executives

and staff in related department (including spouses and minor child of

concerned persons), as well as determine penalty for internal information

disclosure, the misuse of internal information, explain to the Board of

Directors and Management The duty of securities holding reporting to

Securities and Exchange Commission (SEC) under Section 59 of the

Securities and Exchange Act. 2535, and inform announcement regulations o

SEC and The Stock Exchange of Thailand to The Board of Directors and

Management of the Company regularly.


59

5.3 The Roles of Stakeholders

The Company realizes the rights of all stakeholders related to the Company,

including internal stakeholders such as shareholders, employees, and management of the

Company, or external stakeholders, such as competitors, partners, and customers, etc. The

Company understands that support and relationship management to all stakeholders are

beneficial to the Company’s performance in the future and the Company shall treat every

parties equally according to laws and regulations as follows:

Shareholders: Besides the basic rights of shareholders and the rights

stipulated by the laws and the company’s article of association, such as rights to

attend the shareholders’ meetings and vote at the meeting , rights to freely

express opinions at the shareholders’ meetings, and rights to receive an

appropriate return. The company gives shareholders the right, as the owner of the

company, to make suggestions and comments on the company’s affairs through

the independent directors. Each comment and suggestion will be carefully

considered and presented to the Board of Directors.

Employees: The Company believes that employees are the most valuable

assets. The company always develops competence of every employee to support

business expansion plan. Furthermore, the company treats its employees in such

a way that they feel happy to perform their assigned tasks, improve working

environment to ensure safe, modern and healthy welfare appropriately.

Trading partners: The Company purchases products and services according to

commercial terms including perform the contracts with partners fairly.

Competitors: Competitors will be treated fairly under normal competitive

term and without any illegal practices to destroy them.

Customers: The Company takes care and responses to all customers by

providing standard quality products as well as keeps their confidential data.

Communities: The Company is responsible to environment of community and

society

The Company has established guidelines to reflect needs of all stakeholders clearly

in “Code of Conduct”, as well as support The Board of Directors, Management, employees

to respect “Code of Conduct” as if it is part of their important responsibilities.

5.4 Information Disclosure and Transparency


60

The Company realizes the importance of information disclosure and transparency in

both financial information reports and general reports in accordance to regulations of

information disclosure of Securities and Exchange Commission and The Stock Exchange of

Thailand, as well as other essential information that may affect stock prices, investors or

stakeholders’ decisions.

The Company shall disclose information of the Company to shareholders, investors,

and public via communication system set up by Securities and Exchange Commission and

The Stock Exchange of Thailand and the Company website, http://www.energyearth.co.th

About investor relations, the Company hasn’t organized such particular team. However, the

Company has assigned Assistant Managing Director (Finance and Accounting) to be the

contact point with investors, shareholders, analysts, and related public organizations.

Shareholders and investors may contact this contact point at Mr. Thanawat Pratoomsuwan,

Assistant Managing Director (Finance and Accounting), Telephone No. 02-673-9631 or Email

address: [email protected]

5.5 Responsibilities of the Board of Directors

Director Structure

The Board of Directors of the Company consist of knowledgeable, skillful and

experienced persons who can contribute to the Company and play important roles in

setting up policies, strategies as well as follow up overall performance every quarter. The

Board of Directors also needs to pay serious attention on internal control and internal audit

for the best benefit of the Company and shareholders.

There were 13 directors in the Company, consisting of 5 Non Managing Directors with

qualification of being independent directors no less than one-third of total directors. Their

duties are to review and collate matters and management of the Management Team for the

best benefit of the Company.

The Board of Directors had appointed 2 sub-committees to help supervise the Company’s

business. The 2 sub-committees are Audit Committee and The Board of Executive

Committee. The Company had divided duties and responsibilities of The Board of Directors,

Audit Committee and The Board of Executive Directors to shareholders clearly for

independency in decision making and vision proposals as already mentioned above in

section “Management Structure”.


61

Independent Directors

and Audit Committee

Company has 5 independent directors, 4 of which are

audit Committee to perform particular duties and

propose important matters to The Board of Directors to

acknowledge within scope and authorities assigned.

The Board of Executive

Directors

The Company has 6 executive directors to perform duties

effectively within scope and authorities assigned.

The Company also has policies to divide position of chairman and position of

managing director to be different persons in order to protect unlimited authorities for one

person. The Board of Directors shall assign authorities, duties and appoint individuals to

take such positions.

The Company has company secretary who has duties to advise rules and regulations that

The Board of Directors are required to acknowledge. The secretary also monitors The Board

of Directors’ activities and ensure that The Board of Directors’ meeting resolutions are

performed accordingly.

Directors’ remuneration

The Company reported directors’ remuneration clearly and in compliance with the

announcement of Securities and Exchange Commission. The mentioned remuneration must

be approved in Annual General Meeting every year. In the case that directors of the

Company are assigned to perform more duties, such as also take the position of audit

committee, directors will receive appropriate remuneration depending on the Company’s

status.

Policy on Corporate Governance

The Board of Directors had set policy on corporate governance on The Board of

Directors Meeting No. 3/2011 held on 10 February 2011. The policy was approved in the

meeting.

The Company realized the importance of the policy of corporate governance since it will be

very much beneficial to the performance, as well as enhance stability of the Company.

About establishing performing guidelines, the Company pays high attention to internal

control and internal audit. The Board of Directors will have assessment of internal control

every year starting from year 2011 for good corporate governance according to regulations

of the Stock Exchange of Thailand.


62

The Board of Directors collates and performs duties according to the stated policies. The

Company shall operate business in compliance with laws and regulations of SEC and The

Stock Exchange of Thailand.

Conflicts of interest

The Board of Directors established policies on conflicts of interest based on that any

acts and decisions must be made upon the best benefit of the Company and one should

avoid any acts involved conflicts of interests. Any individuals related to connected

transactions or items who may have conflicts of interest must inform the Company about

their relationship with such transactions and do not have the right to vote or approve such

activities.

The Audit Committee shall propose The Board of Directors about the related and

connected transactions and collate them carefully. The Company had complied with laws

and regulations of The Stock Exchange of Thailand strictly about pricing and other

conditions with individuals who may have conflicts of interest as if they are outsiders. Such

transactions are disclosed in financial statements, annual report and Form 56-1.

Report of the Board of Directors

The Board of Directors is responsible for financial reports of the Company and its

subsidiaries, as well as information disclosed in annual report, 56-1, and financial

statements collated by Audit Committee. Directors are also responsible for internal

control, and adequacy of information disclosure in Notes of Finance Statements which are

presented to The Board of Directors quarterly. Financial statements are audited by certified

auditor approved by SEC and have disclosed important information both financial

information and non-financial information accurately.

The Board of Directors Meeting

The Company holds The Board of Directors Meeting at least every quarter, and

Extraordinary General Meeting depending on the necessities by stating clears agendas in

advance and must monitor progress of the performance. The company secretary shall be

responsible for preparing agendas for the meeting and sending out meeting invitation paper

to The Board of Directors no less than 7 days before the meeting day, so that directors may

have time to consider and study agendas sufficiently. The company secretary is also

responsible for keeping reports that are approved by The Board of Directors systematically

for related parties to speculate.


63

In considering agendas, The Chairman shall allow directors to state opinions freely.

Voting in the meeting shall be counted on majority. One director has one vote, directors

who may be stakeholders are not allowed to attend the meeting, or not allowed to vote on

such matters. If the votes are equal, Chairman will make the decisive vote.

In 2012, the Company held 13 Board of Directors Meeting, attendance of each director is as

follows:

Number Name Attendance

2012

1. Mr. Phisudhi Phihakendr 5

2. Mr. ParadaBunnag 5

3. Mr. Khajohnpong Khamdee 5

4. Mr. Phiroon Phihakendr 5

5. Mr. Phipat Phihakendr 5

6. Mr. Phiboon Phihakendr 5

7. Ms. KanchanaChakvichitsopon 5

8. Mr. Thanawat Pratoomsuwan 5

9. Mr. Nugoon Sri-in 5

10. Mr. SomkiatSukdheva 5

11. Mr. SuriyapornBunchai 5

12. Mr. EknarinThammaraks 5

13. Mr. ThongchaiWatanasoponwong 3

In 2012, Energy Perfect Company Limited held 13 Board of Directors Meeting, attendance of

each director is as follows:

Number Name Attendance

2012

1. Mr. Phisudhi Phihakendr 13

2. Mr. Khajohnpong Khamdee 13

3. Mr. Phiroon Phihakendr 13


64

4. Mr. Phipat Phihakendr 13

5. Mr. Phiboon Phihakendr 13

6. Mr. Thanawat Pratoomsuwan 12

Remarks: The resolution of Board of Directors Meeting No. 1/2012 appointed Mr. Thanawat

Pratoomsuwan as Director on 4 January 2012.

Internal Control and Internal Audit

The Company realizes the importance of internal control both in management and

operating level. For the most effective performance, the Company has set duties and

authorizes for employees and management clearly with handwritten signatures. Company’s

assets must be controlled and used effectively for the best benefit of the Company. The

Company also assigned internal audit to collate internal control to ensure that the

Company’s internal control is adequate, effective, financially controlled, effectively

accomplished as well as supervising acts concerning laws and regulations relating to the

Company. The internal audit result shall be reported directly to Audit Committee.

6. Policies and Practices of the Use of Inside Information

The Company has policies and methods to protect directors and management to

gain personal profitability by the use of inside information of the Company that has not yet

been disclosed to public as follows:

• Give more knowledge to directors and management about duties to report

securities holding of individuals, spouses, minor child to SEC and The Stock

Exchange of Thailand.

• The Company determines Management to report change of securities holding

to SEC and the Stock Exchange of Thailand and send out copies of the

report to the Company on this same day.

• The Company prohibits directors, management, employees who have

information to disclose information to outsiders, or unrelated individuals. All

should not purchase or sell stocks of the Company before financial

statements are about to be published, must not disclose the Company’s

status or other important information and should wait at least 24 hours after

information already disclosed to public before trading stock


65

Connected Transactions with Companies or persons who may have conflicts of interests

During the year 2011-2012, Company Group had connected transactions with people who may have conflicts of interests which were stated in

auditors’ notes as follows:

Connected Party

Relationship Type of

Connected Transaction

Transaction Value Audit Committee’s Comments /

Necessity/Rationale 2011 2012

1. WTEC Co., LTD (“WTEC”)

Business “Computer

system retails and

consultant”

Group Company’s directors: Mr. Khajohnpong Khamdee, Mr. Phiroon Phihakendr, Mr. Phipat Phihakendr, and Mr. Senee Hongsubchat are also the directors of WTEC The Company’s shareholders: Mr. Phiroon Phihakendr, Mr. Khajohnpong Khamdee, Mr. Phipat Phihakendr, and Mr. Phiboon

Equipment Purchases

221,350 344,527

Cost for IT and system equipment for Company Group to benefit control and communication between departments within Company Group. The price and condition are regular and such price already includes post sales service. Audit Committee’s Comments The audit committee considered and opined that EPCL has the necessity to purchasethe equipment with reasonable prices. The price has a reference market price. Purchasing the equipment from WTEC is convenient for after sales service because WTEC is located near the Company. However, if there is similar transaction in the future, the price and condition received must be competitive to other companies.

Connected Transaction


66

2. Energy Perfect Company Limited

Share directors and shareholders

Coal Purchase Vehicle rental Equipment purchase Goods advance payment -Value at the end of year Accrued Expenses -Value at the end of year

666,979,206

1,530,000 348,940

24,398,701

181,900

203,000,000

217,848,243

1,992,000 1,951,000

-

1,107,180 1,016,199

Purchase coal from subsidiary at 5 and 15%lower than the regular price subsidiary sells to other customers. Rent vehicle from subsidiary at 12,000 – 29,000 Baht Purchase equipment from subsidiary in agreed price Pay for goods advance payment to subsidiary, so subsidiary can use the advancepayment to reserve goods for Company Group Outstanding of vehicle rental from December 2011 The Company gives loans to subsidiary without charging interests Audit Committee’s Comments The Audit Committee considered that the Company has necessity to purchase, rent vehicles and equipment from subsidiary with rational price. Subsidiary has necessity to get loan from the Company as working capital, in which the Company did not charge for interests, and the subsidiary had already paid back.

Measures and Procedures for the Approval of Connected Transactions The Board of Directors have considered and unanimously resolved that in the case of connected transactions with persons who may

have conflicts of interests in the future, each case must be proposed to the Board of Directors Meeting for consideration and final approval. The meeting also requires the presence of audit committees to ensure that the transactions are transparent, appropriate, have reasonable pricing policies and generate the best profitability for the Company. The persons who may have conflicts of interests shall not have voting rights in the transactions. In the event that the audit committees do not possess the required knowledge or specialization to speculate such transactions, the Company shall assign individuals with the required knowledge or special expertise, such as the Auditor of the Company, the independent appraisers, to comment on such transactions to the Board of Directors or the Shareholders, depending on each case. However, the Company shall perform this procedure in accordance with laws and regulations of the Stock Exchange of Thailand and Securities and Exchange Commission. All connected transactions are to be disclosed in the auditor’s notes to financial statements, the Annual Report, and Form 56-1.


67

Financial Analysis and Operating Results

1. Analysis and Operating Results

1.1 Overall Outlook of Past Performance

The Company Group’s revenue and net profit have been increasing continuously. In

2011-2012, the sales revenue was 4,685.12 and 10,406.28 million baht and net profit was

395.68 and 1,162.03 million baht, respectively.

Overall performance outlook of Company Group was still growing because of

the followings:

Fuel Price in the world marketing is still increasing,

consumers who used oil and natural gas as their energy source

started to switch to use coal as alternative energy. Thus, the

Company Group has more revenue from coal sales in both

domestic and international.

The Company Group continuously expands customers both

domestic and international. International marketing was an

excellent to increase revenue because international consumers

have great amount of demand for coal, while domestic

marketing will lower the risk of relying too much on few large

customers.

Growing sales volume and total revenue in each year

resulted in better gross profit and net profit.

1.2 Past Performance

Revenue

Revenue Types

Financial Statement of the Company Group

2012 2011 Increase/(Decrease)

Million

Baht

% Million

Baht

% Million

Baht

%

Revenue from Sales

Domestic 1,649.95 15.80 926.64 19.68 723.31 78.06

Financial Analysis and Operating Results


68

International 8,756.33 83.83 3,758.47 79.81 4,997.86 132.98

Total Income from Coal Sales 10,406.28 99.63 4,685.11 99.49 5,721.17 122.11

Income from Exchange Rate 29.37 0.28 15.98 0.34 13.39 83.79

Other Income 9.19 0.09 8.18 0.17 1.01 12.35

Total Income 10,444.84 100.00 4,709.27 100.00 5,735.57 121.79

During 2011-2012, the Company Group had increasing revenues from 4,709.28

million baht in 2011 to 10,444.84 million baht in 2012, which represents a growth rate of

121.79%. Majority of income came from total income of coal sales, which are 99.49% in

2011 and 99.63% in 2012.

Coal sales revenue increased from 4,685.11 million baht in 2011 to

10,406.28 million baht in 2012, which represents a growth rate of 122.11%. The

increased revenue during the certain period occurred as followings:

1. The Company Group expanded to both domestic and

international markets because oil prices rise and many industrial

factories turned to use coal as their alternative energy.

2. In 2012, the Company Group was very successful expanding into

international markets, especial end users such as power plants

in China.

Profit

Net profit during the year 2011-2012 is 395.68 million baht and 1,280.44 million baht

respectively. The net profit in 2012 is increasing significantly because of the better economic

situation, higher coal price and increasing sales.

2. Company’s Financial Status

2.1 Assets

Total Assets of Company Group are growing continuously during the year 2011-

2012, the amount at the end of each accounting period are shown in the following table.


69

Asset Types

Financial Statement of the Company Group

2012 2011 Increase

(Decrease)

Million

Baht

% Million

Baht

% Million

Baht

%

Current Assets 6,996.91 79.39 2,088.54 50.91 4,908.37 235.01

Non-Current Assets 1,816.31 20.61 2,013.97 49.09 (197.66) (9.81)

Total Assets 8,813.22 100.00 4,102.51 100.00 4,710.71 114.83

Growth Rate of Current

Assets 235.01 198.59

Growth Rate of Non-Current

Assets (9.81) 218.17

Growth Rate of Total Assets 114.83 207.89

Total assets of Company Group are increasing from 4,102.51 million baht in

2011 to 8,813.22 million baht in 2012. In 2011-2012, current assets are 2,088.54

and 6,996.91 million baht with the ratio of 50.91% and 79.39% of total current

assets respectively. The current assets are increasing dramatically because of

increasing in trade accounts, inventory, and advance payment from purchase of

goods.

Advance payments from purchase of goods in amount of 1,909.49 million

baht in 2012 are the advance coal payment to mine owners in Indonesia. Each

time the coal is imported; such amount will be deducted until the value is

complete. The Company Group had necessity to do the advance payments to

secure steady coal supply for customers.

Non-current assets also have a tendency to decrease continuously.

Main assets compound with four groups, including fixed asset, inventory,

mining property rights, and trade accounts. In 2012, such group compares with

total assets and the ratios are 2.79%, 6.62%, 9.46%, and 49.18%, respectively.


70

Moreover, fixed asset is added to fifth group. Trade account and inventory details

are shown below:

(a) Trade accounts and notes receivables (Net)

Trade accounts receivable of Company Group in 2011-2012 can be categorized

by aging in the following table:

Trade Account Receivables Details

Financial Statement of Company

Group

2012 2011

Million

Baht

% Million

Baht

%

Not Overdue 3,876.69 91.18 68.95 5.35

Overdue

Less than 3 months 354.46 8.34 1,209.18 93.76

3 – 6 months 15.95 0.38 0.60 0.05

6 – 12 months 0.16 0.00 0.40 0.03

More than 12 months 4.37 0.10 10.49 0.81

Total 4,251.63 100.00 1,289.61 100.00

Less, Allowance for Obsolescence Inventories (4.22) (0.10) (8.87) (0.69)

Trade Account Receivables (Net) 4,247.41 99.90 1,280.74 99.31

The Company Group has a policy to give credit terms to most domestic customers

30-90 days. Foreign customers must follow the letter of credit term, which based on many

considerate factors such as past performance, purchasing volume, or competitive market

during that certain period.

Account receivables, who are still not overdue had increased from 5.35% in 2011 to

91.18% in 2012, while account receivables, who are less than 3 months overdue decreased

dramatically from 93.76% in 2011 to 8.34% in 2012 because customers request to extend

payment periods from 30 days to 90 days. Account receivables, who are more than 3 - 6

months, 6 - 12 months, and more than 12 months overdue, are 0.05%, 0.03%, and 0.81%, in

2011 respectively. In 2012, these ratios are decreasing with 0.38%, 0.00%, and 0.10%,


71

respectively. We can negotiate term of payments with customers. In addition, we have

ability and efficiency to choose high class customers.

Inventory

The Company Group has inventory at the end of each accounting period are shown

below.

Inventories

Financial Statements of the

Company Group

2012 2011

Million

Baht

% Million

Baht

%

Raw Materials 531.24 23.11 174.81 16.14

Gasoline 0.89 0.04 0.56 0.05

Finished Goods 0.00 0.00 5.23 0.48

Goods in Transit 52.48 0.68 15.69 1.45

Total 584.61 196.29

Less, Allowance for Obsolescence Inventories (1.11) (1.11)

Net 583.50 195.18

Remark: term of inventory = [360/ (cost of sales/inventory of each category)]

Details of each inventory are shown below:

Raw Materials: Coal is imported from Indonesia and stored in sorting factories to screen sizes.

Gasoline: The Company Group sells gasoline to truck companies, which transport products

for us. We try to provide accommodate and saving time to them. The Company Group does

not gain any profit for selling gasoline.

Finished Goods: The finished goods are ready to deliver to customers. Our policies are to

store enough products without more reserve because we do not want to add expenses.

Goods in Transit: Coal is in transit before go to Sriracha factory. We hire inventory expertise

to check our stock.


72

Liquidity

In 2011 – 2012, liability structure is shown below:

Items

Financial Statements of the

Company Group (Unit = Million

Baht)

2012 2011

Million

Baht

% Million

Baht

%

Total Current Liabilities 5,700.81 64.68 2,210.86 53.89

Total Non-Current Liabilities 36.16 0.41 52.68 1.28

Total Liabilities 5,736.97 65.10 2,263.54 55.17

Increase Current Liabilities Ratio 157.85 138.67

Increase Non-Current Liabilities Ratio (31.36) (20.87)

Increase Total Liabilities Ratio 153.45 127.97

Current Liability

Most of liability structure of the Company Group is a current liability, which

is increasing significantly. Trade account payables are decreasing from 128.16

million baht in 2011 to 72.21 million baht in 2012. Thus, the current liability

increases because sales increase.

At 31 December 2012, the Company Group has overdrafts facilities, packing

credits, and the short-term loans from financial institutions amounting to 6,582.00

million baht (As at 31 December 2011: amounting to 735.00 million baht). The

loans charged interest at the rate of floating interest rate.

The overdrafts facilities and the short-term loans from financial institutions

facilities are secured over deposits from financial institutions. In consolidated and


73

separate financial statements, the Company Group and EARTH have deposits from

financial institutions in the amount of 525.30 million baht and 335.63 million baht,

respectively at 31 December 2012 (2011: 426.08 million baht and 70.79 million

baht, respectively). These deposits are secured over overdrafts from financial

institutions and guarantee of electricity.

Property, plant, and machineries assets do not use in operations

guaranteed by the Company and subsidiary, partial of directors’ shares and

directors.

Under the terms of the loan agreement, the Company Group must comply

with the terms and conditions of certain loan agreements such as secured over

current ratio etc.

2.2 Liquidity

Cash Flow Statement

Items

Financial Statements of the Company Group (Unit = Million

Baht) 2555 2554

1.1 Profit (Loss) before changing in assets and liabilities activities 2,034.48 630.05 1.2 Account Receivable & Inventory (Increase) Decrease (3,408.36) (1,005.13) 1.3 Other Operating Assets Activities (Increase) Decrease (1,521.63) (269.74) 1.4 Other Operating Liability Activities (Increase) Decrease 11.87 (142.57) Total cash receiving (payment) from operating activities (2,883.61) (787.39)

2.1 Interest payment (82.91) (60.31) 2.2 Income tax payment and income withholding tax (244.71) (87.89)

Total cash flow gain (loss) from operating activities (3,211.25) (935.59)

Net Profit 1,280.44 395.68


74

Cash flow statements are used to consider liquidity in 2011 – 2012 as follows:

In 2011, the Company Group increases many investing asset of operating activities

(main activities are account receivable and inventory, which equal to 1,005.13 million baht).

So, the Company Group has cash flow from profit before changing in assets and liabilities in

the amount of 630.05 million baht. In addition, cash flow from other operating liabilities is

increasing in the amount of 142.57 million baht. In 2011, the Company Group has cash flow

from operating activities in the amount of 787.39 million baht. After deducting cash flow

from interest and income tax, net cash flow from operating activities is negative 935.59

million baht.

In 2012, the Company Group increases several investing asset of operating activities

(main activities are account receivable and inventory, which equal to 3,020.04 million baht).

So, the Company Group has cash flow from profit before changing in assets and liabilities in

the amount of 2,034.48 million baht. Cash flow from operating activities equals to negative

2,883.63 million baht. After deducting cash flow from interest and income tax, net cash flow

from operating activities is negative 3,211.25 million baht

Current ratio

The Company Group’s current ratio is 0.94 times, and 1.23 times during 2011 – 2012,

respectively. In 2010 - 2012, current assets and non-current assets have increased. Our cash

flow has come from current liabilities, which are short-term loans and account payable.

However, if the fixed deposit is pledged in short-term loans, pluses current assets, ratio of

current assets to current liabilities would be 1.14 times in 2011 and 1.32 times in 2012 as

follows:

Liquidity Ratio (Unit: Times)

Financial Statement of the

Company Group

2012 2011

Ratio of current assets to current liabilities 1.23 0.94

Ratio of current assets to current liabilities (for

adjusted)1/ 1.32 1.14

Ratio of speed liquidity 0.79 0.66

Ratio of cash flow (0.81) (0.60)

Remarks: 1/ the case if the fixed deposit is pledged in loans, it will be shown in

current assets instead of non-current assets in the financial statement.


75

A liquidity ratio in 2011 is 0.66 times because of lower in accounts receivable. In

2012, the liquidity ratio is 0.79 times because of higher in accounts receivable.

Expenditure

The Company Group had capital expenditure in 2011-2012 as shown below:

Investment Items

Financial statement of the

Company Group (Unit = Million

Baht)

2012 2011

Property, plant, and equipment 2.22 65.53

Mines in Indonesia 1,104.11

The Company Group expensed in land, property, equipment, machines, and vehicles

in the amount of 65.53 million baht in 2011 and 2.22 million baht in 2012.

On November, 2011, the Company Group had acquired a mine in Indonesia by

swapping shares with PT. TRI TUNGGAL PITRIATI at 1,000 shares with the value of 1,104.11

million baht. The balance is 833.90 million baht since 2012.


76

Report of the Board of Directors’ responsibility on financial reports

Energy Earth Public Company Limited’s Board of Directors are responsible

for financial statements, financial information of the Company and its

subsidiaries that appear in the Annual Report. The financial statements are

in accordance with the general accounting standards, and disclose

substantial information about financial status and overall performance

accurately, as well as monitoring a good information disclosing system in

the notes to financial statements for the best benefit of shareholders and

investors.

The Board of Directors had appointed the Audit Committee to be

responsible for monitoring and speculating financial reports to be

presented accurately, sufficiently and in compliance with business

accounting standard, as well as providing appropriate and effective internal

control. Comments of the Audit Committee are also shown in the report

of the Audit Committee in the annual report.

The Board of Directors resolved that the Company has a sufficient internal

control and can deliver reliable financial statements of the Company and

its subsidiaries as of 31 December 2012, in which the auditor of the

Company had audited in accordance with the general auditing standards,

and the result was accurate and satisfactory.

(Mr. Phisudhi Phihakendr) (Mr. Khajohnpong Khamdee)

Chairman Managing Director

Financial Statements


77

Report of the Audit Committee for the year 2012

Dear Shareholders of Energy Earth Public Company Limited

In the accounting period of the year 2012, the Audit Committee of Energy Earth

Public Company Limited and its subsidiaries have performed the duty and responsibility

which have been assigned by the Board of the Directors in accordance with the laws and

regulations of the Stock Exchange of Thailand.

Every member of the Audit Committee have consulted and held meetings with the

auditor to review the finance statements which have been prepared by the management

team. In the meeting with the auditor, we have invited the management team to explain

details and facts about important business information, which are summarized as follows:

1. Review of the Financial Statements of the year 2012

The audit committee had inquired facts and asked for clarification and procedures

about the Company’s business from the executives and the auditor to ensure that the

financial statements and disclosed information are complete, accurate and transparent in

accordance with the laws and regulations of the Stock Exchange of Thailand.

The Audit Committee have reviewed and resolved that the financial statements for

the year ended 31 December 2012 are complete and accurate in accordance with the

general accounting standards.

2. Evaluation of the Internal Control

The Audit Committee have evaluated the internal control in accordance with the

regulations stated by Securities and Exchange Commission, and resolved that the Company

has the internal control system and risk management that are appropriate to the status of

the Company and efficient enough according to Good Corporate Governance, in which take

into account the benefits and fairness of all concerned parties.

3. Review of Compliance with the Stock Exchange of Thailand Act, Laws and

Regulations Related to Business

The Company has a secured system to protect insider trading, and the regulations

supervise the management to report holding of securities of the Company in According with

laws. The Company pays high attention to the information disclosure in financial statements

and other reports that they are complete, correct, reliable, and comply with laws relating to

business operation as strictly as possible.


78

4. Review and Comments on Connected Transactions, or Transactions that may

have Conflicts of Interests

The Company has disclosed all items required by regulations of the Stock Exchange of

Thailand and Securities and Exchange Commission, and has also shown such items in

financial statements and notes to financial statement completely and accurately.

5. Selection of the Independent Auditor for the year 2012

The Audit Committee has considered an appointment the auditor based on the

followings:

5.1Reliance and reputation of the auditor’s company, its past performance, and meets

all the criteria specified by the Stock Exchange of Thailand.

5.2 Independency, duty responsibility and reliable investigating performance.

The Audit Committee has resolved to assign Mr. Boonlert Kaeophetpruk, Certified

Public Accountant Registration No. 4165 and/or Mr. Narit Saowaluxsakul, Certified Public

Accountant Registration No. 5369 of BPR Audit and Advisor, and DR. Achmad Rodi

Kartamulia, Certified Public Accountant Registration No. 0102 of ACHMAD, RASYID, HISBULLAH

& JERRY REGISTERED PUBLIC ACCOUNTANTS to be the auditor for the year 2012. In the

accounting period of the year 2012, the Board of Directors recognized the importance of

good governance, management, morality, ethical principals in doing business transparently,

properly and had no substantial defectiveness.

On Behalf of the Audit Committee

(Mr. Somkiat Sukdheva)

Chairman of the Audit Committee


79

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Energy Earth Public Company Limited

I have audited the accompanying consolidated and separate financial statements of Energy

Earth Public Company Limited and its subsidiaries, and of Energy Earth Public Company

Limited, respectively, which comprise the consolidated and separate statement of financial

position as at December 31, 2012, the consolidated and separate statements of

comprehensive income, changes in equity and cash flows statements for the year then

ended, and a summary of significant accounting policies and other notes.

Management's Responsibility for the Consolidated and Separate Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated

and separate financial statements in accordance with Thai Financial Reporting Standards,

and for such internal control as management determines is necessary to enable the

preparation of consolidated and separate financial statements that are free from material

misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on these consolidated and separate financial

statements based on my audit. I conducted my audit in accordance with Thai Standards on

Auditing. Those standards require that I comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether the consolidated and

separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the

financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.


80

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a

basis for my audit opinion.

Opinion

In my opinion, the consolidated and separate financial statements referred to above fairly, in

all material respects, the financial position as at December 31, 2012, and the financial

performance and cash flows for the year then ended of Energy Earth Public Company

Limited and its subsidiaries, and of Energy Earth Public Company Limited, respectively, in

accordance with Thai Financial Reporting Standards.

(Ms.Wimolsri Jongudomsombut)

Certified Public Accountant

Registration No. 3899

Karin Audit Company Limited

Bangkok

February 27, 2013


81

ENERGY EARTH PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2012

AND INDEPENDENT AUDITOR’S REPORT

EXPRESSED IN THAI BAHT

ENERGY EARTH PUBLIC COMPANY LIMITED AND SUBSIDIARIESSTATEMENTS OF FINANCIAL POSITION

AS AT DECEMBER 31, 2012 AND 2011

Notes 2012 2011 2012 2011

ASSETS

CURRENT ASSETS

Cash and cash equivalents 9 147,878,545 174,142,351 123,314,512 9,974,367

Trade and other accounts receivable - net 10 4,334,677,532 1,309,987,092 1,441,885,915 99,381,404

Inventories - net 8,11 583,496,344 195,180,818 583,496,344 -

Loans and accrued interest income to related companies 8 - - 2,445,844,452 -

Advance payment from purchase of goods 1,909,496,488 389,908,882 883,346,465 108,279,416

Other current assets 21,362,757 19,322,544 17,656,361 386,758

Total current assets 6,996,911,666 2,088,541,687 5,495,544,049 218,021,945

NON-CURRENT ASSETS

Deposits from financial institutions pledged as collateral 12 525,303,970 426,079,487 335,633,131 70,789,501

Investments in subsidiaries 13 - - 1,302,650,620 1,302,650,620

Property, plant and equipment - net 14 246,109,784 266,420,487 3,746,988 1,936,456

Assets not used operations 15 173,465,888 179,831,291 - -

Mining property rights - net 16 833,901,279 1,104,108,666 - -

Goodwill 36,478,256 36,478,256 - -

Other non-current assets 1,047,348 1,046,725 305,396 267,113

Total non-current assets 1,816,306,525 2,013,964,912 1,642,336,135 1,375,643,690

TOTAL ASSETS 8,813,218,191 4,102,506,599 7,137,880,184 1,593,665,635

The accompanying notes to financial statements are an integral part of these financial statements.

Baht

Consolidated Separate financial statements financial statements


82


STATEMENTS OF FINANCIAL POSITIONAS AT DECEMBER 31, 2012 AND 2011

Notes 2012 2011 2012 2011

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIESBank overdrafts and short-term loans from financial institutions 17 5,142,088,868 1,896,567,096 3,278,679,290 247,105,807Trade and other accounts payable 18 233,473,077 180,063,764 624,788,665 10,043,748 Short-term loans and accrued interest expenses

from related company 8 - - 1,016,199 -

Current portion of long-term loans from financial institutions 19 14,194,221 14,129,696 - -

Current portion of liabilities under hire-purchase agreements 20 2,200,772 3,288,085 330,460 278,254Income tax payable 304,976,892 113,649,774 124,442,082 - Other current liabilities 8 3,880,950 3,154,757 1,790,974 298,859

Total current liabilities 5,700,814,780 2,210,853,172 4,031,047,670 257,726,668

NON-CURRENT LIABILITIES

Long-term loans from financial institutions - net 19 30,617,704 44,812,531 - -

Liabilities under hire-purchase agreements - net 20 3,618,803 6,324,883 620,169 950,629

Employee benefit obligations 21 1,926,816 1,547,436 1,260,812 1,034,271

Total non-current liabilities 36,163,323 52,684,850 1,880,981 1,984,900

TOTAL LIABILITIES 5,736,978,103 2,263,538,022 4,032,928,651 259,711,568

SHAREHOLDERS' EQUITY

Common shares Authorized shares - Baht 1 per value

3,027,615,570 common shares 3,027,615,570 3,027,615,570 3,027,615,570 3,027,615,570

Issued and paid-up common shares

2,605,495,683 common shares

as at December 31, 2012 and 2,554,170,445

common shares as at December 31, 2011 22 2,605,495,683 2,554,170,445 2,605,495,683 2,554,170,445

Share premium 796,214,166 772,296,604 796,214,166 772,296,604

Share discount (1,800,000,000) (1,800,000,000) (1,800,000,000) (1,800,000,000)

Adjustment of equity interests under reverse acquisition 22 (186,616,802) (186,616,802) - -

Total 1,415,093,047 1,339,850,247 1,601,709,849 1,526,467,049

Appropriated - legal reserve 23 95,200,000 2,950,000 75,200,000.00 -

Retained earnings (deficit) 1,619,327,968 431,143,864 1,428,041,684 (192,512,982)

Other components of shareholders' equity (54,234,922) 63,920,615 - -

Equity attribuable to owners of Company 3,075,386,093 1,837,864,726 3,104,951,533 1,333,954,067

Non-controlling interests 853,995 1,103,851 - -

TOTAL SHAREHOLDERS' EQUITY 3,076,240,088 1,838,968,577 3,104,951,533 1,333,954,067

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 8,813,218,191 4,102,506,599 7,137,880,184 1,593,665,635


Consolidated Separate financial statements financial statements

Baht


83

ENERGY EARTH PUBLIC COMPANY LIMITED AND SUBSIDIARIESSTATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

Notes 2012 2011 2012 2011

Sales 10,406,279,275 4,685,117,913 3,370,047,225 773,210,614

Cost of sales 8 (8,278,771,286) (3,898,669,202) (2,618,192,428) (666,976,367)

Gross profit 2,127,507,989 786,448,711 751,854,797 106,234,247

Other incomes

Devidend income 13 - - 1,140,000,000 -

Profit on foreign exchange rate 29,374,458 15,982,305 - - Other incomes 8 9,192,214 8,183,838 309,185,408 462,117

Total other incomes 38,566,672 24,166,143 1,449,185,408 462,117

Profit before expenses 2,166,074,661 810,614,854 2,201,040,205 106,696,364

Expenses

Selling expenses 188,586,784 89,551,118 163,771,030 10,189,682

Administrative expenses 8 102,917,180 64,939,940 82,909,826 43,903,107

Managements' remuneration 18,410,000 15,293,926 18,410,000 14,057,926Other expenses - 14,216,616 8,579,633 -

Total expenses 309,913,964 184,001,600 273,670,489 68,150,715

Profit before finance costs and income tax 1,856,160,697 626,613,254 1,927,369,716 38,545,649

Finance costs 8 (139,773,237) (67,882,338) (70,615,769) (7,054,874)

Profit before income tax 1,716,387,460 558,730,916 1,856,753,947 31,490,775

Income tax (435,945,661) (163,417,803) (160,999,281) -

Net income 1,280,441,799 395,313,113 1,695,754,666 31,490,775

Translation adjustments (113,539,309) 365,877 - -

Surplus on revaluation of land (4,873,779) - - -

Total comprehensive income 1,162,028,711 395,678,990 1,695,754,666 31,490,775

Profit for the years attributable to:

Owner of the Company 1,280,434,104 395,313,382 1,695,754,666 31,490,775

Non-controlling interests 7,695 (269)

1,280,441,799 395,313,113

Profit and comprehensive income for the years:

Owner of the Company 1,162,278,567 395,678,893 1,695,754,666 31,490,775

Non-controlling interests (249,856) 97

1,162,028,711 395,678,990

Earnings per share

Basic earnings - Equity holders of the parent company 24 0.50 0.17 0.66 0.01

Diluted earnings - Equity holders of the parent company 24 0.45 0.16 0.59 0.01


Baht

Consolidated Separate

financial statements financial statements


84

ENERGY EARTH PUBLIC COMPANY LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


Adjustment of

Issued and equity interests

paid-up under reverse Appropriated - Surplus on Translation Non-controlling

Note common shares Share discount Share premium acquisition Legal reserve Unappropriated revaluation of land adjustment Total interests Total

Balance as at January 1, 2011 2,222,712,675 1,800,000,000- - 186,616,802- 2,950,000 35,830,482 63,555,104 - 63,555,104 - 338,431,459

Increase in common shares 331,457,770 - 772,296,604 - - - - - - - 1,103,754,374

Non-controlling interests in subsidiary - - - - - - - - - 1,103,754 1,103,754

Profit and comprehensive income for the year - - - - - 395,313,382 - 365,511 365,511 97 395,678,990

Balance as at December 31, 2011 2,554,170,445 1,800,000,000- 772,296,604 186,616,802- 2,950,000 431,143,864 63,555,104 365,511 63,920,615 1,103,851 1,838,968,577

Balance as at January 1, 2012 2,554,170,445 1,800,000,000- 772,296,604 186,616,802- 2,950,000 431,143,864 63,555,104 365,511 63,920,615 1,103,851 1,838,968,577

Increase in common shares 22 51,325,238 - 23,917,562 - - - - - - - 75,242,800

Appropriated - Legal reserve - - - - 92,250,000 (92,250,000) - - - - -

Profit and comprehensive income for the year - - - - - 1,280,434,104 (4,873,779) (113,281,758) (118,155,537) (249,856) 1,162,028,711

Balance as at December 31, 2012 2,605,495,683 1,800,000,000- 796,214,166 186,616,802- 95,200,000 1,619,327,968 58,681,325 (112,916,247) (54,234,922) 853,995 3,076,240,088


Baht

Equity attributable to owners of Company

Other component of sharesholders' equity

Retained earnings Other comprehensive income


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SEPARATE STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


Issued andpaid-up Share Premium on Appropriated -

Note common shares discount common shares Legal reserve Unappropriated Net

Balance as at January 1, 2011 2,222,712,675 (1,800,000,000) - - (224,003,757) 198,708,918

Increase in common shares 331,457,770 - 772,296,604 - - 1,103,754,374

Profit and comprehensive income for the year - - - - 31,490,775 31,490,775

Balance as at December 31, 2011 2,554,170,445 (1,800,000,000) 772,296,604 - (192,512,982) 1,333,954,067

Balance as at January 1, 2012 2,554,170,445 (1,800,000,000) 772,296,604 - (192,512,982) 1,333,954,067

Increase in common shares 22 51,325,238 - 23,917,562 - - 75,242,800

Legal reserve 23 - - - 75,200,000 (75,200,000) -

Profit and comprehensive income for the year - - - - 1,695,754,666 1,695,754,666

Balance as at December 31, 2012 2,605,495,683 (1,800,000,000) 796,214,166 75,200,000 1,428,041,684 3,104,951,533


Baht

Retained earnings


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STATEMENTS OF CASH FLOWS


2012 2011 2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before income tax 1,716,387,460 558,730,916 1,856,753,947 31,490,775

Adjustments to:

Bad debts and doubtful debts (reversal of) (4,649,414) 2,388,821 - -

Depreciation 25,447,138 23,829,825 629,907 192,537

Loss on write-off assets 426,010 - - -

Amortization of mining property rights 267,433,837 - - -

Gain on disposal of fixed asset - (185,572) - -

Loss from sale and leaseback - 50,260 - -

Loss on obsolescence inventories - - 1,109,628 -

(Profit) loss on impairment of fixed assets (2,200,000) 11,777,535 - -

Employee benefit expenses 379,380 460,187 226,541 222,438

Unrealized (gain) loss on foreign exchange rate 19,612,892 (26,562,872) 4,373,332 -

Translation adjustments (113,539,309) - - -

Dividend income - - (1,140,000,000) -

Interest expenses 125,183,573 59,560,712 61,196,931 6,875,403

Profit before changes in operating assets and liabilities 2,034,481,567 630,049,812 784,290,286 38,781,153

Decrease (increase) in operating assets

Trade and other accounts receivable (3,020,041,026) (1,005,412,006) (1,342,504,511) (98,902,852)

Inventories (388,315,526) (5,880,439) (584,605,972) -

Advance payment from purchase of goods (1,519,587,606) (261,993,412) (775,067,049) (108,279,416)

Other current assets (2,040,213) (941,638) (17,269,603) (370,475)

Other non-current assets (1,284) (638,153) (38,283) (267,113)

Increase (decrease) in operating liabilities

Trade accounts payable and other accounts payable 11,139,514 (138,175,610) 611,744,200 8,994,781

Other current liabilities 726,193 (4,399,882) 1,492,115 80,566

Cash paid from operating activities (2,883,638,381) (787,391,328) (1,321,958,817) (159,963,356)

Cash paid for interest expenses (82,913,774) (60,313,905) (58,196,214) (6,839,647)

Cash paid for income tax and

withholding tax deducted at source (244,710,207) (87,888,016) (36,557,199) (660)

Net cash used in operating activities (3,211,262,362) (935,593,249) (1,416,712,230) (166,803,663)


Baht




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STATEMENTS OF CASH FLOWS


Note 2012 2011 2012 2011

CASH FLOWS FROM INVESTING ACTIVITIES

Increase in deposits pledged as collateral (99,224,483) (235,588,985) (264,843,630) (70,639,277)

Proceeds from disposal of investment in a subsidiary - - - 1,103,754

Proceeds from dividends- subsidiary company - - 1,140,000,000 -

Repayment for short-term loan and accrued interest income to related company - - (2,445,844,452) -

Cash paid for purchase of property, plant and equipment 7 (1,870,820) (61,067,766) (2,440,439) (673,053)

Proceeds from disposal of equipment - 1,409,011 - -

Net cash used in investing activities (101,095,303) (295,247,740) (1,573,128,521) (70,208,576)

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in overdraft and short-term loans

from financial institutions 3,228,774,754 1,378,204,155 3,027,200,151 247,105,807

Increase in short-term loans from related company - - 1,016,199 -

Cash paid for long-term loans from financial institutions (14,130,302) (15,961,259) - -

Cash paid for liabilities under hire-purchase agreements (3,793,393) (4,377,884) (278,254) (119,201)

Proceeds from increase in share capital 75,242,800 1,103,754 75,242,800 -

Net cash provide by financing activities 3,286,093,859 1,358,968,766 3,103,180,896 246,986,606

Increase in cash and cash equivalents - net (26,263,806) 128,127,777 113,340,145 9,974,367

Exchange gain from cash and cash equivalents - 1,087,174 - -

Cash from acquisition of investment in a subsidiary - 32,458 - -

Cash and cash equivalents, beginning of years 174,142,351 44,894,942 9,974,367 -

Cash and cash equivalents, end of years 147,878,545 174,142,351 123,314,512 9,974,367


Baht




88

Analysis of Financial Statements 1. GENERAL INFORMATION

Energy Earth Public Company Limited is listed on the Market for Alternative Investment

of Thailand (MAI) on January 15, 1996, The principal business operations principally

engaged in the manufacture and distribution of coal.

The office is located on 889, 12th Floor Thai CC Tower, Room 125-128, South Sathorn Road,

Yannawa, Bangkok.

On January 29, 2013, The Frankfurt Stock Exchange - Open Market has approved the

Company’s common shares to list in the Frankfurt Stock Exchange - Open Market in

form of Secondary listing. The Company has used existing 1,276,692,885 common shares

(49% of the paid-up share capital) without increasing share capital to trade.

2. BASIS OF FINANCIAL STATEMENTS PREPARATION

2.1 BASIS OF FINANCIAL STATEMENTS

The financial statements are prepared in accordance with Thai Financial Reporting

Standards (“TFRS”) including related interpretations and guidelines promulgated by

the Federation of Accounting Professions (FAP); applicable rules and regulations of

the Thai Securities and Exchange Commission; and with generally accepted

accounting principles in Thailand.

The financial statements issued for Thai statutory and regulatory reporting purposes

are prepared in the Thai language. These English language financial statements have

been prepared from the Thai language statutory financial statements.

2.2 BASIS OF FINANCIAL STATEMENTS

a) The consolidated financial statements for the year ended December 31, 2012,

has been included the financial statements of Energy Earth Public Company

Limited and subsidiary and oversea subsidiary (PT. Tri Tunggal Pitriati) after

eliminated significant inter-company transactions. The financial statements for

such oversea subsidiary reflect total assets as of December 31, 2012 amount of

Baht 1,769.71 million (equivalent to 0.20% of total assets in the consolidated

financial statements), total liabilities amount of Baht 1,991.85 million


89

(equivalent to 0.34% of total liabilities in the consolidated financial statements)

and net loss for the year then ended amount of Baht 7.70 million (equivalent to

0.60% of net profit in the consolidated financial statements)

b) “The Company” represents Energy Earth Public Company Limited, while “The

Group” represents Energy Earth Company Limited and subsidiaries as follows :

Country of Percentage of

holding

Companies registration 2012 2011 Type of business

Subsidiaries

Energy Perfect Co., Ltd. Thailand 100.00 100.00 Manufacture and

distribution of coal.

PT. Tri Tunggal Pitriati Indonesia 99.90 99.90 Mining of coal.

The significant transactions between the Company and the subsidiary have been

eliminated in the consolidated financial statements.

c) Subsidiaries are fully consolidated as from the date of acquisition, being the

date on which the Company obtains control, and continue to be consolidated

until the date when such control ceases.

d) The assets and liabilities in the financial statements of oversea subsidiary are

translated to Baht using the exchange rate prevailing on the statement of

financial position date, and revenues and expenses translated using monthly

average exchange rates. The resulting differences are shown under the caption

of “Translation adjustments” in the shareholders’ equity.

e) Material balances and transactions between the Company and its subsidiaries

have been eliminated from the consolidated financial statements.


90

f) Non-controlling interests represent the portion of net income or loss and net

assets of the subsidiary that are not held by the Company and are presented

separately in the consolidated statement of comprehensive income and within

equity in the consolidated statement of financial position.

g) The excess of the cost of investment in a subsidiary over the Company's

interest in the fair value of the identifiable assets, liabilities and contingent

liabilities of the subsidiary acquired as at the investment date has been shown

as “Goodwill” and included in other non-current assets in the consolidated

statement of financial position and is measured at cost less any accumulated

impairment losses.

2.3 Basis of measurement

The financial statements have been prepared on the historical cost.

2.4 Presentation currency

The financial statements are prepared and presented in Thai Baht. All financial

information presented in Thai Baht has been rounded to the nearest thousand or

million unless otherwise stated.

3. NEW ACCOUNTING STANDARDS NOT YET EFFECTIVE

The following new accounting standards, amendments to accounting standards, new

financial reporting standard and new interpretation are mandatory, but the Company

has not early adopted them.

Effective for the periods beginning on or after 1 January 2013

TAS 12 Income Taxes

TAS 20 (Revised 2009) Accounting for Government Grants and Disclosure of

Government Assistance

TAS 21 (Revised 2009) The Effects of Changes in Foreign Exchange Rates

TFRS 8 Operating Segments

TSIC 10 Government Assistance - No Specific Relation to Operating


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Activities

TSIC 21 Income Taxes - Recovery of Revalued Non-Depreciable Assets

TSIC 25 Income Taxes - Changes in the Tax Status of an Entity or its

Shareholders

Effective for the periods beginning on or after 1 January 2014

TFRIC 4 Determining whether an Arrangement contains a Lease

TFRIC 12 Service Concession Arrangements

TFRIC 13 Customer Loyalty Programmes

TSIC 29 Service Concession Arrangements: Disclosure

The Company’s management has determined that the new accounting standards,

amendments to accounting standards, new financial reporting standard and new

interpretation will not significantly impact the financial information being presented, except

for TAS 12 Income Taxes and TAS 21 The Effects of Changes in Foreign Exchange Rates

which the management is currently assessing the impact of applying this standard.

4. SIGNIFICANT ACCOUNTING POLICIES

4.1 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with financial

institutions, other short-term highly liquid investments with maturities of three

months or less from the date of acquisition.

4.2 Current investments

Current investments are bill of exchange with an original maturity of over one year

after the acquisition date.


92

4.3 Trade accounts receivable

Trade accounts receivable are carried at original invoice amount less allowance for

doubtful receivables based on a review of all outstanding amounts at the year end.

The amount of the allowance is the difference between the carrying amount of the

receivable and the amount expected to be collectible. Bad debts are written off

d u r i n g t h e y e a r i n w h i c h t h e y a r e i d e n t i f i e d .

4.4 Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is

determined the first in - first out method (FIFO). The cost of purchase comprises

both the purchase price and costs directly attributable to the acquisition of the

inventory, such as import duties and transportation charges, less all attributable

discounts, allowances or rebates. The cost of finished goods comprises raw

materials, direct labour, other direct costs and related production overheads, the

latter being allocated on the basis of normal operating activities. Net realisable

value is the estimate of the selling price in the ordinary course of business, less the

costs of completion and selling expenses.

4.5 Investment in subsidiary

Subsidiary, which are those entities in which the Company has power to govern the

financial and operating policies, are consolidated. Subsidiary is consolidated from the

date on which controls is transferred to the Company and are no longer consolidated

from the date that control ceases.

Investment in subsidiary is reported by using the cost method of accounting in the

separate financial statements.

A test for impairment is carried out when there is a factor indicating that an

investment might be impaired. If the carrying value of the investment is higher than

its recoverable amount, impairment loss is charged to the statement of

comprehensive income.\

4.6 Property, plant and equipment


93

Land is stated at revalued amount. Building and equipment are stated at historical

cost less accumulated depreciation and impairment of asset (if any).

Land are initially recorded at cost on the acquisition date, and subsequently

revalued by an independent professional appraiser to their fair values. Revaluations

are made with sufficient regularity to ensure that the carrying amount does not

differ materially from fair value at the statement of financial position date.

When an asset’s carrying amount is increased as a result of a revaluation of the

Group’s assets, the increase is credited directly to equity under the heading of

“Surplus on revaluation of land”

Depreciation is calculated on the straight line method to write off the cost, except

for land which is considered to have an indefinite life, to its residual value over the

estimated useful life as follows:

Building and building improvement 5 - 20 years

Office equipment and fixtures 5 years

Computer equipment 3 - 5 years

Machineries and equipment 5 - 10 years

Vehicles 5 years

Where the carrying amount of an asset is greater than its estimated recoverable

amount, it is written down immediately to its recoverable amount. Estimated

recoverable amount is the higher of the anticipated discounted cash flows from the

continuing use of the asset and the amount obtainable from the sale of the asset

less any costs of disposal.

Subsequent costs

The cost of replacing a part of an item of property, plant and equipment is

recognised in the carrying amount of the item if it is probable that the future

economic benefits embodied within the part will flow to the Company, and its cost


94

can be measured reliably. The carrying amount of the replaced part is

derecognised. The costs of the day-to-day servicing of property, plant and

equipment are recognised in profit or loss as incurred.

Interest costs on borrowings to finance the construction of assets are capitalized as

part of cost of the asset, during the period of time required to complete and prepare

the property for its intended use. The borrowing costs include interest on long-term

borrowing net of amortization of related deferred financial cost.

Gains and losses on disposals are determined by comparing proceeds with the

carrying amount and are included in operating profit.

4.7 Assets not used in operations

Assets are stated at revalued amount.

Land and land improvement are initially recorded at cost on the acquisition date,

and subsequently revalued by an independent professional appraiser to their fair

values. Revaluations are made with sufficient regularity to ensure that the carrying

amount does not differ materially from fair value at the statement of financial

position date.

When an asset’s carrying amount is increased as a result of a revaluation of the

Company’s assets, the increase is credited directly to equity under the heading of

“Revaluation surplus on assets”.

4.8 Mining property rights

Mining property rights represent the excess of the cost of an acquisition over the fair

value of net assets, which in managements’ view represents future economic

benefits attributable to the mining rights held by subsidiary. Mining property rights

are amortised using the units of coal production.

4.9 Goodwill

At the acquisition date, the Company recorded goodwill in the business

combination (Reverse Acquisition), which is the excess of the cost of the business


95

combination over the Company’s equity in the net fair value of the identifiable

assets, liabilities and contingent liabilities.

Goodwill is carried at cost less any impairment losses. Goodwill is tested for

impairment annually and when circumstances indicate that the carrying value may

be impaired.

4.10 Impairment of assets

The carrying amounts of the Company’s assets are reviewed at each reporting date

to determine whether there is any indication of impairment. If any such indication

exists, the assets’ recoverable amounts are estimated. For intangible assets that

have indefinite useful lives or are not yet available for use, the recoverable amount

i s e s t i m a t e d e a c h y e a r a t t h e s a m e t i m e s .

An impairment loss is recognised if the carrying amount of an asset or its cash-

generating unit exceeds its recoverable amount. The impairment loss is recognised

in profit or loss unless it reverses a previous revaluation credited to equity, in which

case it is charged to equity.

4.11 Calculation of recoverable amount

The recoverable amount of a non-financial asset is the greater of the asset’s value

in use and fair value less costs to sell. In assessing value in use, the estimated

future cash flows are discounted to their present value using a pre-tax discount rate

that reflects current market assessments of the time value of money and the risks

specific to the asset. For an asset that does not generate cash inflows largely

independent of those from other assets, the recoverable amount is determined for

the cash-generating unit to which the asset belongs.

4.12 Reversals of impairment

Impairment losses recognised in prior periods in respect of other non-financial

assets are assessed at each reporting date for any indications that the loss has

decreased or no longer exists. An impairment loss is reversed if there has been a

change in the estimates used to determine the recoverable amount. An

impairment loss is reversed only to the extent that the asset’s carrying amount


96

does not exceed the carrying amount that would have been determined, net of

depreciation or amortisation, if no impairment loss had been recognised.

4.13 Leases

Leases of assets which substantially transfer all the risks and rewards of ownership

are classified as finance leases. Finance leases are capitalised at the inception of

the lease at the lower of the fair value of the leased property or the present value

of the minimum lease payments. Each lease payment is allocated to the principal

and to the finance charges so as to achieve a constant rate on the finance balance

outstanding. The outstanding rental obligations, net of finance charges, are included

in other long-term payables. The interest element of the finance cost is charged to

the statement of comprehensive income over the lease period so as to achieve a

constant periodic rate of interest on the remaining balance of the liability for each

period. The assets acquired under finance leases is depreciated over the useful life

of the asset.

Leases not transferring a significant portion of the risks and rewards of ownership to

the lessee are classified as operating leases. Payments made under operating leases

(net of any incentives received from the lessor) are charged to the statement of

comprehensive income on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired any

payment required to be made to the lessor by way the penalty is recognised as an

expense in the period in which the termination takes place.

4.14 Provision

Provisions are recognised when the Group has a present legal or constructive

obligation as a result of past events, it is probable that an outflow of resources will

be required to settle the obligation, and a reliable estimate of the amount can be

made. Where the Group expects a provision to be reimbursed, the reimbursement

is recognised as a separate asset but only when the reimbursement is virtually

certain.

4.15 Employee benefits


97

Post-employment benefit plan other than a defined contribution plan. The

Company’s obligation in respect of post employment benefits under defined

benefit plans recognized in the financial statements based on calculations by the

independent actuary using the projected unit credit method estimating the amount

of future benefit that employees have earned in return for their service in the

current and prior periods; that benefit is discounted to determine its present value.

The Company recognises all actuarial gains and losses arising from defined benefit

plans in other comprehensive income and all expenses related to defined benefit

plans in profit or loss.

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis

and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash

bonus if the Company has a present legal or constructive obligation to pay this

amount as a result of past service provided by the employee, and the obligation

can be estimated reliably.

4.16 Revenue recognition

Revenue comprises the invoiced value for the sale of goods and services net of

value-added tax, rebates, discounts and transportation. Revenue from sales of

goods is recognised when significant risks and rewards of ownership of the goods

are transferred to the buyer.

Sales of coal are quantified by weight at the front mine. The increment or

reduction of coal values as a result of quality and weight noticed by customers will

be recorded in the month of goods delivery.

Other income is recognized on an accrual basis.

4.17 Foreign currency translation

Foreign currency transactions are translated into Thai Baht using the exchange rates

prevailing at the date of the transaction. Monetary assets and liabilities

denominated in foreign currency are translated to Thai Baht at the exchange rate


98

prevailing at the statement of financial position date. Gains and losses resulting

from the settlement of foreign currency transactions and from the translation of

monetary assets and liabilities denominated in foreign currencies are recognised in

the statement of comprehensive income.

Statements of comprehensive income and cash flows of foreign entities are

translated into Thai Baht at the weighted average exchange rates for each month

and statement of financial position are translated at the exchange rates ruling on

the end of reporting period. Currency translation differences arising from the

retranslation of the net investment in foreign entities are taken to shareholders’

equity. On disposal of such foreign entity, accumulated currency translation

differences are recognised in the consolidated statement of comprehensive income

as part of the gain or loss on disposal.

4.18 Income tax

The Group records income tax based on the actual amount currently payable

according to the tax legislation.

4.19 Basic earnings per share

Basic earnings per shares are calculated by dividing the net profit attributable to

shareholders by the weighted average number of common shares during the year.

4.20 Diluted earnings per share

Diluted earnings per share is calculated by dividing net profit for the year by the

number of ordinary shares and the number of equivalent ordinary shares (Warrant)

by weighted according to the period of time as if there were conversion of ordinary

shares at the issued date of issuance of equivalent ordinary shares.

4.21 Financial instruments

Financial assets carried on the statement of financial position include cash and cash

equivalents, trade and other accounts receivables, loans, investment, restricted

deposits at financial institutions and some other current assets. Financial liabilities

carried on the statement of financial position include bank overdrafts and short-

term loans from financial institutions, trade and other accounts payables and long-


99

term loans and some other current liabilities. The particular recognition methods

adopted are disclosed in the individual policy statements associated with each

item.

4.22 Related parties

Enterprises and individuals that directly, or indirectly through one or more

intermediaries, control, or are controlled by, or are under common control with,

the company, including holding companies, subsidiaries and fellow subsidiaries are

related parties of the company. Associates and individuals owning, directly or

indirectly, an interest in the voting power of the company that gives them significant

influence over the enterprise, key management personnel, including directors and

officers of the company and close members of the family of these individuals and

companies associated with these individuals also constitute related parties.

In considering each possible related party relationship, attention is directed to the

substance of the relationship, and not merely the legal form.

5. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of financial statements in conformity with TFRS requires management to

make judgements, estimates and assumptions that affect the application of policies and

reported amounts of assets, liabilities, income and expenses. Actual results may differ

from estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which estimates are revised and in

any future periods affected.


100

Information about significant areas of estimation uncertainty and critical judgements in

applying accounting policies that have the most significant effect on the amount

recognised in the financial statements is included in the following note:

Note 21 Discount rate, estimation of salary increase rate, employee turnover rate and

mortality rate.

6. CAPITAL RISK MANAGEMENT

The Group objectives when managing capital are to safeguard the Group’s ability to

continue as a going concern in order to provide returns for shareholders and benefits

for other stakeholders and to maintain an optimal capital structure to reduce the cost

of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount

of dividends paid to shareholders, issue new shares or sells assets to reduce debt.

7. SUPPLEMENTARY INFORMATION OF CASH FLOWS STATEMENTS

Supplementary information of cash flows statement for the years ended December 31,

2012 and 2011 is as follow :

Baht

Consolidated

financial statements

Separate


2012 2011 2012 2011

Purchase of property, plant and

equipment (1,870,820) (65,530,658) (2,440,439) (2,128,993)

Adjust Increase in payable from

acquisition of assets - 107,856 - 107,856

Increase in liabilities under

hire-purchase

agreements - 4,355,036 - 1,348,084

Cash paid for purchase of property,

plant and equipment (1,870,820) (61,067,766) (2,440,439) (673,053)


101

8. RELATED PARTIES TRANSACTIONS

Relationships

2012 2011

Subsidiaries

Energy Perfect Co., Ltd. Direct shareholding, shareholders

and directorship

Direct shareholding, shareholders

and directorship

PT.TRI TUNGGAL PITRIATI Direct shareholding, shareholders

and directorship

Direct shareholding, shareholders

and directorship

Related Companies

WTEC Co., Ltd. Directorship Directorship

Related persons

Khun Nugoon Sri-In Shareholder and director Shareholder and director

The pricing policies between the Group with related parties are as follows:

Price policy


102

Price policy

Purchase of goods

- Local 5% and 15% discount from

lli i th t S b idi ld

5% and 15% discount from

lli i th t S b idi ld- Abroad Cost plus margin -

Purchase of oil Mutually agreed price -

Factory rental 200,000 per month -

Coal processing service

expense

Baht 160 per ton

(Less than 50,000 tons)

Baht 140 per ton

-

Income from management 5% from International sales of -

Interest income Interest at the rate of 7.7% per No interest charge

Transportation expenses Cost plus margin -

Rental expenses Baht 12,000 - 29,000 per month Baht 12,000 - 29,000 per month

Interest expense Interest at the rate of 7.7% per No interest charge

Purchase of equipment Mutually agreed price Mutually agreed price

Outstanding balance between the Group with related parties

Outstanding balance between the Group with related parties as at December 31, 2012

and 2011, are as follows:

Baht

Consolidated


Separate



103

2012 2011 2012 2011

Other account receivable

Energy Perfect Co., Ltd. - - 638,774,326 -

Goods in transit

PT.TRI TUNGGAL PITRIATI - - 52,475,638 -

Short-term loan to and

accrued interest income

Short-term loan to

Energy Perfect Co., Ltd. - - 1,084,684,900 -

PT.TRI TUNGGAL PITRIATI - - 1,332,867,495 -

Total - - 2,417,552,395 -

Accrued interest income



Total - - 28,292,057 -

Total short-term loan to and

accrued interest income - - 2,445,844,452 -

Advance payment for goods

Energy Perfect Co., Ltd. - - - 24,398,701

Trade accounts payable


104

Baht

Consolidated


Separate


2012 2011 2012 2011



Total - - 447,111,502 -

Short-term loan from and

accrued interest expense

Short-term loan from


Accrued interest expense

Energy Perfect Co., Ltd. - - 16,199 -

Short-term loan from and

accrued interest expense - - 1,016,199 -

Accrued expenses

Energy Perfect Co., Ltd. - - 1,107,180 181,900

Payable from acquisition of

assets

WTEC Co., Ltd. - 107,856 - 107,856

Other account payable


105

Baht

Consolidated


Separate


2012 2011 2012 2011

Energy Perfect Co., Ltd. - - 195,929 -

The movement of short-term loans to related company in the separate financial

statements for the year ended December 31, 2012 is as follow :

Baht

As at

January 1, Movement

As at

December

31,

2012 Increase Decrease 2012

Short-term loans to related

company

Energy Perfect Co., Ltd. -

1,519,335,600 (434,650,700) 1,084,684,900

PT.TRI TUNGGAL PITRIATI -

1,622,781,473 (289,913,978) 1,332,867,495

Total -

3,142,117,073 (724,564,678) 2,417,552,395

The movement of short-term loans from related company in the separate financial


Baht


106

As at

January 1, Movement

As at

December

31,


Short-term loans from related

company

Energy Perfect Co., Ltd. - 341,150,300 (340,150,300) 1,000,000

The movement of short-term loan from related person in the consolidated financial


Baht

As at

January 1, Movement

As at

December

31,


Short-term loan from

Khun Nugoon Sri-In - 5,290,774 (5,290,774) -

Transactions between the company and related parties.

Revenues and expenses transactions with related parties for the years ended December

31, 2012 and 2011 are as follows :

Baht

Consolidated


Separate



107

2012 2011 2012 2011

Purchase of goods

Energy Perfect Co., Ltd. - - 217,848,243 666,979,026


Total - -

1,150,047,34

6 666,979,026

Purchase of oil


Coal processing service

expense


Factory rental


Income from management

fee


Interest income



Total - - 30,091,244 -

Transportation expenses



108

Baht

Consolidated


Separate


2012 2011 2012 2011

Vehicle rental

Energy Perfect Co., Ltd. - - 1,992,000 1,530,000

Interest expenses


Purchase of equipment

and vehicle

Energy Perfect Co., Ltd. - - 1,951,000 348,940

WTEC Co., Ltd. 344,527 221,350 344,527 100,800

Total 344,527 221,350 2,295,527 449,740

9. CASH AND CASH EQUIVALENTS

Baht

Consolidated


Separate


2012 2011 2012 2011

Cash 256,657 85,915 20,000 18,715

Deposits at financial 147,619,877 174,056,436 123,292,501 9,955,652


109

institutions - at call

Fixed Deposit (3 months) 2,011 - 2,011 -

Total 147,878,545 174,142,351 123,314,512 9,974,367

10. TRADE AND OTHER ACCOUNTS RECEIVABLE - NET

Baht

Consolidated


Separate


2012 2011 2012 2011

Trade accounts receivable -

net

In due

3,876,687,050 68,947,595 506,301,313

68,919,78

2

Over due

Up to 3 Months 354,458,525

1,209,180,96

1

226,106,650

28,206,34

9

Over 3 - 6 Months

15,953,205 595,534 15,953,205 595,534

Over 6 - 12 Months

161,062 397,189 161,062 31,011

Over 12 Months

4,373,834

10,493,58

2 - -

Total 4,251,633,676 1,289,614,861

748,522,230

97,752,67

6

Less Allowance for doubtful (8,873,248- -


110

accounts (4,223,834) )

Net

4,247,409,842

1,280,741,61

3

748,522,230

97,752,67

6

Other accounts receivable


- related companies - -

638,774,3

26 -


- others companies 55,984,221 27,907,896 24,971,919 1,156,935

Prepaid expenses 31,283,469 1,337,583 29,617,440 471,793

Total other accounts receivable 87,267,690 29,245,479 693,363,685 1,628,728

Total trade and other

accounts

receivable 4,334,677,532

1,309,987,09

2

1,441,885,915

99,381,40

4

As at December 31, 2012 and 2011 the Company has trade accounts receivable to make

factoring with financial institution amounting to Baht 219.59 million and Baht 15.37

million, respectively.

11. INVENTORIES – NET

Baht

Consolidated


Separate


2012 2011 2012 2011

Raw Materials 531,238,403 174,809,422 531,238,403 -


111

Gasoline 891,931 562,055 891,931 -

Finished goods - 5,225,347 - -

Goods in transit 52,475,638 15,693,622 52,475,638 -

Total 584,605,972 196,290,446 584,605,972 -

Less Allowance for

obsolescence

inventories (1,109,628) (1,109,628) (1,109,628) -

Net 583,496,344 195,180,818 583,496,344 -

12. DEPOSITS FROM FINANCIAL INSTITUTION PLEDGED AS COLLATERAL

As at December 31, 2012, the consolidated and separate financial statements, the

Group and the Company held deposits with financial institutions amounting to Baht

525.30 million and Baht 335.63 million respectively, (As at December 31, 2011 : Baht

426.08 million and Baht 70.79 million, respectively) which were pledged as collateral for

credit facilities from financial institutions (Note 17) and collateral for the usage of

electricity.


112

13. INVESTMENTS IN SUBSIDIAIESIES

Separate financial statements

Baht

Paid-up capital (Million) % Holdings Cost Method

Dividend income for the

nine-month periods ended

Currency 2012 2011 2012 2011 2012 2011 2012 2011

Energy Perfect Co., Ltd.

(Import coal and trading coal) Baht 200 100 100 100 200,000,000 200,000,000 1,140,000,000 -

PT.TRI TUNGGAL PITRIATI

(Mining of coal) Rupiah 8,521 8,521 99.9 99.9

1,102,650,620 1,102,650,620 - -

Total 1,302,650,620 1,302,650,620 1,140,000,000 -


113

Dividends payment of subsidiary

At the resolution of the Board of Directors’ meeting of Energy Perfect Co., Ltd. on March 11, 2012, the board of directors approved the

resolution to pay

the interim dividend for 20,000,000 shares at Baht 17.00 per share. The Company earned the dividend by Baht 340.00 million.

At the resolution of the Board of Directors’ meeting of Energy Perfect Co., Ltd. on November 14, 2012, the board of directors approved the

resolution to pay the interim dividend for 20,000,000 shares at Baht 35.00 per share. The Company earned the dividend by Baht 700.00

million

At the resolution of the Board of Directors’ meeting of Energy Perfect Co., Ltd. on December 14, 2012, the board of directors approved the

resolution to pay the interim dividend for 20,000,000 shares at Baht 5.00 per share. The Company earned the dividend by Baht 100.00

million


118

14. PROPERTY, PLANT AND EQUIPMENT - NET

Consolidated financial statements

Baht

Land and

land

Improvement

Building and

building

Improvement

Office

Equipment

and Fixtures

Computer

Equipment

Machineries

and

equipment Vehicles

Machineries

In Progress Total

As at December 31, 2010

Cost/Revalued amount 235,964,000 89,235,391 1,692,611 1,688,100 92,116,575 15,504,888 - 436,201,565

Less Accumulated depreciation - (1,475,527) (543,982) (590,444) (12,761,707) (3,227,726) - (18,599,386)

Net book value 235,964,000 87,759,864 1,148,629 1,097,656 79,354,868 12,277,162 - 417,602,179

Transactions during the year ended

December 31, 2011

Opening net book value 235,964,000 87,759,864 1,148,629 1,097,656 79,354,868 12,277,162 - 417,602,179

Add Purchase 39,331,291 2,139,020 195,763 197,426 250,109 6,136,297 17,280,752 65,530,658

Transfer in (out) - - - - 17,092,775 - (17,092,775) -


115

Transfer from land not used in

operations (179,831,291) - - - - - - (179,831,291)

Less Disposals - - - - - (1,273,699) - (1,273,699)

Depreciation - (8,571,110) (336,406) (267,314) (11,014,470) (3,640,525) - (23,829,825)

Reversal of surplus on revaluation

of land - - - - (11,777,535) - - (11,777,535)

Ending net book value 95,464,000 81,327,774 1,007,986 1,027,768 73,905,747 13,499,235 187,977 266,420,487


Cost/Revalued amount 95,464,000 91,374,411 1,689,819 1,755,188 109,455,810 20,071,185 187,977 319,998,390


Loss on impairment of fixed

assets - - - - (11,777,535) - - (11,777,535)

Net book value 95,464,000 81,327,774 1,007,986 1,027,768 73,905,747 13,499,235 187,977 266,420,487


116

Consolidated financial statements

Baht

Land and

land

Improvement

Building and

building

Improvement

Office

Equipment

and Fixtures

Computer

Equipment

Machineries

and

equipment Vehicles

Machineries

In Progress Total





assets - - - - (11,777,535) - - (11,777,535)

Net book value 95,464,000 81,327,774 1,007,986 1,027,768 73,905,747 13,499,235 187,977 266,420,487


December 31, 2012

Opening net book value 95,464,000 81,327,774 1,007,986 1,027,768 73,905,747 13,499,235 187,977 266,420,487

Add Surplus on revaluation of land 1,491,625 - - - - - - 1,491,625

Purchase - - 324,115 215,902 1,031,935 298,868 - 1,870,820


117

Reversal of loss on impairment

of fixed assets - - - - 2,200,000 - - 2,200,000

Less write-off - - - - - (426,010) - (426,010)

Depreciation - (8,698,479) (320,210) (308,001) (12,350,947) (3,769,501) - (25,447,138)

Ending net book value 96,955,625 72,629,295 1,011,891 935,671 64,786,734 9,602,592 187,977 246,109,784



Less Accumulated depreciation - (18,745,116) (1,002,043) (1,035,421) (36,123,475) (8,483,926) - (65,389,981)


assets - - - - (9,577,535) - - (9,577,535)

Net book value 96,955,625 72,629,295 1,011,891 935,671 64,786,735 9,602,592 187,977 246,109,784


118


Baht

Office

Equipment

and Fixtures

Computer

Equipment Vehicles Total


December 31, 2011

Opening net book value - - - -

Add Purchase 312,945 192,418 1,623,630 2,128,993

Less Depreciation (45,624) (12,626) (134,287) (192,537)

Ending net book value 267,321 179,792 1,489,343 1,936,456


Cost 312,945 192,418 1,623,630 2,128,993

Less Accumulated depreciation (45,624) (12,626) (134,287) (192,537)

Ending net book value 267,321 179,792 1,489,343 1,936,456

Baht

Office

Equipment

and Fixtures

Computer

Equipment

Machineries

and

equipment Vehicles Total


Cost 312,945 192,418 - 1,623,630 2,128,993

Less Accumulated depreciation (45,624) (12,626) - (134,287) (192,537)

Ending net book value 267,321 179,792 - 1,489,343 1,936,456


119

Transactions during the year

ended December 31, 2012

Opening net book value 267,321 179,792 1,489,343 1,489,343 1,936,456

Add Purchase 262,627 205,812 21,000 1,951,000 2,440,439

Less Depreciation (81,282) (60,176) (608) (487,841) (629,907)

Ending net book value 448,666 325,428 20,392 2,952,502 3,746,988


Cost 575,572 398,230 21,000 3,574,630 4,569,432

Less Accumulated depreciation (126,906) (72,802) (608) (622,128) (822,444)

Ending net book value 448,666 325,428 20,392 2,952,502 3,746,988

Leased assets included above, where the Group is a lessee under hire purchase agreements,

are as follows:

Baht

Consolidated

financial statements Separate


2012 2011 2012 2011

Cost 13,358,504 17,371,284

1,602,634 1,623,630

Less Accumulated depreciation ( 5,967,575) (4,814,663)

( 453,128) (134,287)

Net book value 7,390,929 12,556,621

1,149,506 1,489,343

As at December 31, 2012 the Subsidiary has fully depreciated of fixed assets which are still in

use, the cost of such assets has amounted to Baht 2.68 million (As at December 31, 2011:

Baht 0.36 million).

As at December 31, 2012 and 2011, Property, plant and machineries of the Group in the

consolidated financial statements amounting net book value of Baht 179.29 million and Baht


120

188.70 million, respectively is mortgaged as collateral for short-term loans and long-term

loans from financial institutions (Notes 17 and 19).

The subsidiary’s land and land not use in operation were revalued on December 19 and 21,

2012 by independent appraiser. Valuations were made on the basis of Market Approach.

The book values of the land were adjusted to the revalued amounts and the surplus on

revaluation of land decreased in amounting of Baht 4.87 million.

The subsidiary recorded surplus on revaluation of land in shareholders’ equity.

15. ASSETS NOT USED IN OPERATIONS

Baht

Consolidated


2012 2011

Land 64,058,239 70,423,642

Land improvement 109,407,649 109,407,649

Total 173,465,888 179,831,291

As at December 31, 2012 and 2011, The Subsidiary has land not use in operations amounting

of Baht 173.47 million and Baht 179.83 million, respectively is mortgaged as collateral for

short-term loans and long-term loans from financial institutions (Notes 17 and 19).


121

16. MINING PROPERTY RIGHTS

Movements of mining property rights for the years ended 31 December 2012 are as follows:

Baht

Consolidated


Separate


For year ended December 31, 2012

Beginning net book value 1,104,108,666 -

Less Amortization of mining property rights (267,433,837) -

Translation adjustment (2,773,550) -

Ending net book value 833,901,279 -


122

17. BANK OVERDRAFTS AND SHORT-TERM LOANS FROM FINANCIAL INSTITUTIONS

Baht

Interest rates (%) of per

annum

Consolidated


Separate


2012 2011 2012 2011 2012 2011

Overdrafts 6.875 - 8.000 6.875 - 8.000 52,991,504 24,165,939 28,584,837 -

Promissory notes 3.750 - 7.625 3.750 - 7.625 899,466,883 535,017,918 849,466,883 148,917,918

Trust receipts 3.200 - 7.000 3.411 - 5.450

2,204,259,153 990,991,712 1,932,048,386 84,354,535

Accounts payable

factoring 7.625 - 8.125 7.125 - 7.875

197,629,463 13,833,354 197,629,463 13,833,354

Packing Credit 3.250 - 3.650 3.291 - 7.400

1,787,741,865 332,558,173 270,949,721 -

Total

5,142,088,868 1,896,567,096 3,278,679,290 247,105,807

As at December 31, 2012, The Group has overdrafts facilities, packing credits and the short-

term loans from financial institutions amounting to Baht 6,582.00 million. (As at December

31, 2011: amounting to Baht 735.00 million.) The loans charged interest at the rate of

floating interest rate.

The overdrafts facilities and the short-term loans from financial institutions facilities are

secured over deposits from financial institutions (Note 12), property, plant and machineries

(Note 14), assets not use in operations (Note 15) guaranteed by the Company and subsidiary,

partial of directors’ shares and directors.

Under the terms of the loan agreement, the Group must comply with the terms and

conditions of certain loan agreements such as secured over current ratio etc.


123

18. TRADE AND OTHER ACCOUNTS PAYABLE

Baht

Consolidated


Separate


2012 2011 2012 2011

Trade accounts payable

- related company - - 447,111,502 -

Trade account payable

- other companies 72,207,481 128,155,398 26,099,320 -

Accrued expenses 161,265,596 51,753,716 151,877,543 9,707,197

Other account payable - 154,650 - 336,551

Total trade and other accounts

payable 233,473,077 180,063,764 624,788,665 10,043,748

19. LONG-TERM LOANS FROM FINANCIAL INSTITUTIONS - NET

Baht

Consolidated


Separate


2012 2011 2012 2011

Long-term loans from financial

institutions 44,811,925 58,942,227 - -

Less Current portion (14,194,221) (14,129,696) - -

Net 30,617,704 44,812,531 - -


124

The first line Loan amounted to Baht 3.81 million, which is monthly repayable within 60

equal installment dues of Baht 0.07 million each. The first payment was paid in December

2009. This loan bears interest at the rate of MLR% per annum.

The second line Loan amounted to Baht 80.00 million, which is monthly repayable within 72

equal installment dues of Baht 1.12 million each. The first payment was paid in May 2010.

This loan bears interest at the rate of MLR% per annum.

The movement of long-term loans

for the year ended December 31, 2012

Beginning balance 58,942,227

Less Repayment of loan during the year (14,130,302

)

Ending balance 44,811,925

Such credit facilities are guaranteed by property, plant and machineries (Note 14), assets not

used in operations (Note 15) thereon and directors of company.

Under the loan agreement terms, the Subsidiary must comply with the condition of loan

covenants such as maintain the current ratio, debt to equity ratio and debt service coverage

etc.


125

20. LIABILITIES UNDER HIRE-PURCHASE AGREEMENTS - NET

Baht

Consolidated


Separate


2012 2011 2012 2011

Liabilities under hire-purchase

agreements 6,306,207

10,653,1

02 1,071,264 1,439,511

Less Deferred interest (486,632) (1,040,134) (120,635) (210,628)

5,819,575

9,612,96

8 950,629 1,228,883

Less Current portion (2,200,772) (3,288,085) (330,460) (278,254)

Net 3,618,803

6,324,88

3 620,169 950,629


126

21. EMPLOYEE BENEFIT OBLIGATIONS

The Group operates a post employment benefit and pension based on the requirement of

Thai Labour Protection Act B.E. 2541 (1998) to provide retirement benefits and other long

term benefit to employees based on pensionable remuneration and length of service.

Movement in the present value of the defined benefit obligations for the year ended

December 31, 2012 and 2011 as follows:

Baht

Consolidated financial

statements

Separate


2012 2011 2012 2011

Defined benefit obligations

as at January 1 1,547,436 1,087,249 1,034,271 811,833

Current service costs and

interest 379,380 460,187 226,541 222,438

Defined benefit obligations

as at December 31 1,926,816 1,547,436 1,260,812 1,034,271

Expense recognised in profit or loss for the year ended December 31, 2012 and 2011 :

Baht


statements

Separate


2012 2011 2012 2011

Current service costs 343,295 420,823 206,773 194,641

Interest on obligation 36,085 39,364 19,768 27,797

Total 379,380 460,187 226,541 222,438

The above expense recognised in the statement of comprehensive income for the year

ended December 31, 2012 and 2011 as follows:


127

Baht


statements

Separate


2012 2011 2012 2011

Cost of sales 46,777 42,388 87 80

Selling expenses 17,009 15,396 17,009 15,396

Administrative expenses 315,594 402,403 209,445 206,962

Total 379,380 460,187 226,541 222,438

Principal actuarial assumptions at the reporting date for the year ended December 31, 2012

and 2011 as follows:

Consolidated and


2012 2011

Discount rate 4.20 % 4.20 %

Salary increase rate 6.00 - 15.00 % 6.00 - 15.00 %

Mortality rate

TMO97 (Thailand Mortality

Table in B.E. 2540)

TMO97 (Thailand Mortality

Table in B.E. 2540)

22. SHARE CAPITAL

On September 15, 2011, At the extraordinary shareholders’ meeting, the shareholders has a

resolution to approve an increase in the registered share capital from Baht 2,222,712,675

(2,222,712,675 common shares with a par value of Baht 1 each) to Baht 3,027,615,570

(3,027,615,570 common shares with a par value of Baht 1 each) by issuing 804,902,895

common shares with a par value of Baht 1.00 each to reserve for :

- 331,457,770 common shares (331,457,770 common shares with a par value of Baht 1.00

each) to statements of PT. Tri Tunggal Pitriati to share swap with 1,000 common shares of

PT. Tri Tunggal Pitriati, resulting in a share premium of Baht 772,296,604.

- 444,542,535 common shares for the exercise of warrants (EARTH-W3) 444,542,535

common shares of the Company are to be reserved for the exercise of warrants issued


128

and offered to the Company’s existing shareholders in a ratio of 5 former common shares

equivalent to 1 warrant at selling price of 0 per unit. A warrant can be used to buy 1 new

common share at the exercise price of Baht 1.50.

- To allot 28,902,590 common shares for the adjustment of exercise of the warrants if any.

The Company registered the corresponding increase with the Ministry of Commerce on

November 1, 2011.

As at 31 December 2011, the Company’s issued and fully paid-up common shares has

increased from Baht 2,222,712,675 (2,222,712,675 common shares with a par value of Baht 1

each) to Baht 2,554,170,445 (2,554,170,445 common shares with a par value of Baht 1 each)

resulting in a share premium of Baht 772,296,604.

In the preparation of the consolidated financial statements for a reverse acquisition, equity

interests, as presented in consolidated financial statements, represent the sum of the issued

equity interests of the legal subsidiaries (accounting acquirers) outstanding before the business

combination, the cost of business combination and the equity interests of the legal parent

company (accounting acquiree) issued after the business combination. The details are as

follows:

Baht

2012 2011

Issued equity interests of the legal subsidiaries outstanding

before the business combination, net of non-controlling

interests due to business combination 200,000,000 200,000,000

Cost of business combination

Cost of business combination as at the acquisition date 36,095,873 36,095,873

Equity interests of the legal parent company issued after

the business combination

Share capital issued during 2010 - 2012 382,783,008 331,457,770

Increase in share premium due to share issue 796,214,166 772,296,604


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Baht

2012 2011

Equity interests in the consolidated financial statements 1,415,093,047 1,339,850,247

The above transactions are presented as follows in the consolidated financial statements to

reflect the equity structure of the Company which is the legal parent company:

Baht

2012 2011

Issued and fully paid share capital 2,605,495,683 2,554,170,445

Share premium 796,214,166 772,296,604

Share discount (1,800,000,000) (1,800,000,000)

Adjustment of equity interests under reverse

acquisition (186,616,802) (186,616,802)

Total 1,415,093,047 1,339,850,247

Warrants

Warrants to purchase new common shares of the Company issued to the Company’s existing

shareholders (EARTH-W3)

On September 15, 2011, the Extraordinary shareholders’ meeting No. 1/2011 of the

Company’s shareholders passed a resolution to issue the warrants to purchase new ordinary

shares of the Company issued to the Company’s existing shareholders (EARTH-W3) in a ratio

of 1 warrant for every 5 existing ordinary shares

On October 25, 2011 the Company has adjusted the exercise of warrants (EARTH-W3) to

warrant a unit can be used to buy common shares at 1.023 new common shares and

warrant can be used to buy 1 new common share at the exercise price of Baht 1.466


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Details of warrants are as follows:

Date of grant September 23, 2011

Contractual lifes Less than 5 years from the issue date

Exercisable 15 March and 15 September of each years

On October 17, 2011, 444,519,122 share warrants of the Company were approved to be

traded in on the Market for Alternative Investment of Thailand (MAI) and can be exercised on

15 March and 15 September of each years. The first and last exercise dates will be on March

15, 2012 and September 15, 2016, respectively.

Unit

Share warrants (EARTH-W3) 444,519,122

Warrants exercised

As at March 15, 2012 (125,900)

As at September 15, 2012 (50,045,400)

Warrants had not been exercised 394,347,822

On at March 15, 2012, The Company recorded cash receipt from warrants exercise of Baht

188,812. The Company registered the increase in paid-up share capital from such exercise

with the Department of Business Development on March 21, 2012 for 128,794 common

shares. The increase share capital was approved to be traded in on the Market for

Alternative Investment of Thailand (MAI) on March 27, 2012.

On at September 15, 2012, The Company recorded cash receipt from warrants exercise of

Baht 75,053,988. The Company registered the increase in paid-up share capital from such

exercise with the Department of Business Development on September 20, 2012 for

51,196,444 common shares. The increase share capital was approved to be traded in on the

Market for Alternative Investment of Thailand (MAI) on September 25, 2012.


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23. LEGAL RESERVE

Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is

required to set aside to a legal reserve at least 5 percent of its net profit after deducting

accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the

registered capital. The legal reserve is not available for dividend distribution.

24. DILUTED EARINGS PER SHARE

Consolidated financial statement

For the years ended December 31

Net earnings

(Thousand of Baht)

Weighted average number

Earnings

per share (Baht)

of common shares

(Thousand of Baht)

2012 2011 2012 2011 2012 2011

Basic earnings per share

Net earnings 1,280,434 395,313 2,568,679 2,278,107 0.50 0.17

Effect of dilutive potential

common shares

Warrants

394,347,822 units - - 294,120 278,457

Diluted earnings per share

Net earnings of common

shareholders (assuming

conversion of potential

common share) 1,280,434 395,313 2,862,799 2,556,564 0.45 0.16


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Separate Financial Statement

For the years ended December 31

Net earnings

(Thousand of Baht)

Weighted average number

Earnings

per share (Baht)

of common shares

(Thousand of Baht)

2012 2011 2012 2011 2012 2011

Basic earnings per share

Net earnings 1,695,755 31,491 2,568,679 2,278,107 0.66 0.01

Effect of dilutive potential

common shares

Warrants

394,347,822 units - - 294,120 278,457

Diluted earnings per share

Net earnings of common

shareholders (assuming

conversion of potential

common share) 1,695,755 31,491 2,862,799 2,556,564 0.59 0.01


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25. SEGMENT FINANCIAL INFORMATION

The Group is engaged in the business of trading coal both Thailand and international.

The details of segment information in the Group for the years ended December 31, 2012 and

2011 are as follows.

Million Baht

Thailand International Total

For the year ended December 31, 2012

Sales 1,649.95 8,756.33 10,406.28

Cost of sales (1,119.33) (7,159.44) (8,278.77)

Gross profit 530.62 1,596.89 2,127.51

Assets segment as at December 31, 2012

Property, plant and equipment - net 246.11

Other assets 8,567.11

Total 8,813.22

For the year ended December 31, 2011

Sales 926.64 3,758.47 4,685.11

Cost of sales (837.81) (3,060.86) (3,898.67)

Gross profit 88.83 697.61 786.44

Assets segment as at December 31, 2011

Property, plant and equipment - net 266.42

Other assets 3,836.09

Total 4.102.51


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26. EXPENSES BY NATURE

Expenses by nature for the years December 31, 2012 and 2011 are as follows:

Baht

Consolidated


Separate


2012 2011 2012 2011

Changes in finished goods 5,225,347 17,813,274 - -

Raw materials and consumable used 8,145,393,985 3,821,601,387 2,618,192,428 666,976,347

Coal processing service expense 25,852,412 - 104,518,192 -

Managements’ remuneration 18,410,000 15,293,926 18,410,000 14,057,926

Staff cost 31,149,347 26,322,060 22,602,913 13,464,882

Transportation expense 170,707,307 75,944,511 135,202,445 4,900

Depreciation 25,447,138 23,829,825 629,907 192,537

Loss from assets revaluation - 11,777,535 - -

Bad debt and doubtful debts - 2,388,821 - -

27. REGISTERED PROVIDENT FUND

The Company established a contributory registered provident fund in accordance with the

Provident Fund Act.B.E. 2530. Under the plan, the Company and employees contribute to

the fund at certain percentage of the employee’s basic salary. The Company appointed a

fund manager to manage the fund in accordance with the terms and conditions prescribed

in the Ministerial Regulation No.2 (B.E. 2532) issued under the Provident Fund Act B.E.2530.

The Company has paid contribution to provident fund for the years ended December 31,

2012 amount of Baht 1.22 million (December 31, 2011 : Baht 0.44 million.)


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28. FINANCIAL INSTRUMENTS

a) Liquidity risk

Liquidity risk, or funding risk, is the risk that the Group will encounter difficulty in raising

funds to meet commitments associated with financial instruments. Liquidity risk may

result from an inability to sell a financial asset quickly at close to its fair value.

b) Foreign Currency risk

The Group was exposed to the foreign currency risk because of their foreign currency

transactions. The Group does not enter into any foreign currency derivative contract to

hedge the currency risk.

As at December 31, 2012, The Group has monetary assets and liabilities in foreign

currency which are not hedged are as follow :

Consolidated


Separate

financials statements

Currency Currency

USD Rupiah USD

Cash from financial institution 528,085

3,310,227,635 528,085

Trade accounts receivable 125,832,264

- 11,065,769

Short-term loans to related

company -

- 43,721,072

Accrued interest income -

- 615,674

Advance payment from

purchase of goods 35,951,137.58

260,868,766,626 27,662,854

Trust receipt 71,619,172

- 62,774,702

Short-term loans 58,086,000

- 8,803,500

Trade accounts payable 35,455,680

2,563,773,164 14,581,970

c) Interest rate risk

The Group was exposed to interest risks because it held deposits to and bank overdraft

and loans from financial institutions. However, such financial assets and liabilities are


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short-term, The Group believed that the future fluctuation on market interest rate

would not provided significant effect to their operation and cash flow; therefore, no

financial derivative was adopted to manage such risks.

d) Credit risk

The Group was exposed to credit risk. However, due to the large number and diversity

of the entities comprising the Company’s customer base, The Group does not anticipate

material losses from its debt collection. The Group estimated the allowance for doubtful

accounts from the ending balance of accounts receivable. The estimate was made by

considering the customer’s past collection experiences.

e) Fair value of financial instruments

Fair value is defined as the amount that could be exchanged in a current transaction

between knowledgeable willing parties in an arm’s length transaction. Fair values are

obtained from quoted market prices, discounted cash flow models or net asset values

as appropriate.

The following methods and assumptions are used to estimate the fair value of each

class of financial assets and liabilities:

Cash and cash equivalents, trade accounts receivable, deposits pledged as collateral at

financial institutions, trade accounts payable, income tax payable, accrued expenses,

liabilities under hire-purchase agreements and bank overdraft and loans ; the carrying

values approximate their fair values due to relatively short-term maturity of these

financial instruments.

29. COMMITMENTS AND CONTINGENT LIABILITIES

As at December 31, 2012, The Group commitments and contingent liabilities is as follows:

Commitment

The Company has commitment to pay rental expense agreement amounting of Baht 5.89

million.

The Company has commitment to pay rental machinery and equipment amounting of

Baht 6.96 million.


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The Group and the Company has significant agreement for sale of steam coal with many

foreign companies to sell steam coal in the quantity of 10.94 million metric ton and 8.58

million metric ton respectively.

Contingent liabilities

The Subsidiary has contingent liabilities for letters of guarantee issued by bank for the

electricity usage and sale and purchase contract of steam coal amounting of Baht 0.41

million and USD 0.05 million respectively.

The Company and the subsidiary has contingent liability from guarantee credit facilities

from financial institutions amounting of Baht 5,640 million.

30. SIGNIFICANT CONTRACT AND AGREEMENTS

On November 23, 2012 the Company has entered a joint operating agreement with East Star

Co., Ltd. in the coal mining operation and sales under the coal mining concession rights No.

0006/2010 with an area of 1,262 Rai in Dawei, Myanmar.

Oversea subsidiary (PT. Tri Tunggal Pitriati) has significant contract and agreements as follows :

- The rights under a Coal Contract of Work (“CCOW”) mining license (545/013/IUP-

OP/D.PF/2010) from the Indonesian government to explore for and exploit coal for a

period of five years (From January 15, 2010 till January 15, 2015) in a total survey area of

16.30 hectares in Angsana, Tanah Bambu, Sount Kalimantan, Indonesia.

- The rights to conduct coal mining activities under a Coal Contract of Work (“CCOW”)

mining license (545/106/IUP-OP/D.PF/2010) from the Indonesian government to explore

for and exploit coal until coal reserves in the area is completely mined in a total survey

area of 12.00 hectares in Simpang Empat, Tanah Bumbu, Sount Kalimantan, Indonesia.

31. SUBSEQUENT EVENTS

According to the minutes of Board of directors’ meeting held on December 21, 2012, passed

the resolution to submit the agendas to the extra-ordinary shareholders’ meeting held on

August 30, 2013


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To approve the investment in all 1,000 shares at the par value of Indonesian Rupiah

1,000,000 per share of PT. Hary Niaga. Total purchase value is not more than Baht

3,694,800,000 based on coal reserves/resources not more than 40 million tons. The

Company will make the payment by issuance not more than 454,464,945 newly common

shares with a par value of Baht 1 per share at offering at Baht 8.13 per share on the

private placement basis, as the consideration to the shareholders of PT. Hary Niaga.

To approve the issuance not more than 1,002,971,268 warrants ( EARTH-W4) to purchase

new common shares of the Company issued to the Company’s existing shareholders in a

ratio of 1 warrant for every 3 existing common shares at the exercise price of Baht 8.13.

The contractual life of warrant is 2 years from the issue date.

To approve an increase in the registered share capital from Baht 3,027,615,570

(3,027,615,570 common shares with a par value of Baht 1 each) to Baht 4,500,000,000

(4,500,000,000 common shares with a par value of Baht 1 each) by issuing 1,472,384,430

common shares with a par value of Baht 1.00 each to reserve for :

- 454,464,945 common shares (454,464,945 common shares with a par value of Baht 1

each) to shareholders of PT. Hary Niaga to share swap with 1,000 common shares of

PT. Hary Niaga.

- 1,002,971,168 common shares for the exercise of warrants (EARTH-W4) issued and

offered to the Company’s existing shareholders in a ratio of 3 former common shares

equivalent to 1 warrant at selling price of 0 per unit. A warrant can be used to buy 1

new common share at the exercise price of Baht 8.13.

- To allot 14,948,317 common shares for the adjustment of exercise of the warrants if

any.

32. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were authorized for issue by the Board of directors on February

27, 2013.

Documents

20130405-EARTH-AR2012-ENearth.listedcompany.com/misc/AR/20130405-EARTH-AR2012-EN.pdfIndonesia with rights of mining concessions in Indonesia. The head office address is located at