Financial statements and Audit report of Certified Public

Thai Oil Public Company Limited and its Subsidiaries

Financial statements and

Audit report of Certified Public Accountant

For each of the years ended 31 December 2005 and 2004

Audit Report of Certified Public Accountant To the Shareholders of Thai Oil Public Company Limited I have audited the accompanying consolidated balance sheets of Thai Oil Public Company Limited and its subsidiaries, and the separate balance sheets of Thai Oil Public Company Limited as at 31 December 2005 and 2004, and the related consolidated and separate statements of income, changes in shareholders’ equity and cash flows for each of the years then ended. The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial positions of Thai Oil Public Company Limited and its subsidiaries as at 31 December 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the years then ended, and the separate financial positions of Thai Oil Public Company Limited and the results of its operations and its cash flows for the same years, in accordance with generally accepted accounting principles. (Winid Silamongkol) Certified Public Accountant Registration No. 3378 KPMG Phoomchai Audit Ltd. Bangkok 10 February 2006

2

Thai Oil Public Company Limited and its SubsidiariesBalance sheetsAs at 31 December 2005 and 2004

Assets Note 2005 2004 2005 2004

Current assetsCash and cash equivalents 5, 16 11,251,623,779 6,667,166,281 7,411,402,311 4,170,710,665 Current investments 6, 16 421,487,050 468,479,067 - - Trade accounts receivable, net 4, 7 17,805,388,646 9,832,409,157 16,202,764,962 9,341,645,505 Other receivables from subsidiary and related companies 4 9,984,755 100,543,193 130,347,956 61,505,666 Current portion of long-term receivables from subsidiary companies 4 - - 29,911,934 132,725,668 Inventories, net 8 19,000,930,755 17,624,158,916 16,471,823,476 16,102,092,742 Receivable from Oil Fuel Fund 1,232,606,781 4,016,032,518 1,232,606,781 4,016,032,518 Other current assets 9 1,277,130,251 1,414,557,824 852,540,488 991,125,883 Total current assets 50,999,152,017 40,123,346,956 42,331,397,908 34,815,838,647

Non-current assetsInvestments in shares of subsidiary and related companies, net 10 - 112,945,300 18,887,993,869 8,440,136,298 Long-term receivables from subsidiary companies, net of current portion 4 - - - 250,927,728 Subordinated loan to a subsidiary company 4 - - 136,065,946 120,652,596 Loans to savings co-operative of employees, net of current portion shown under other current assets 481,310,938 492,977,127 481,310,938 492,977,127 Property, plant and equipment, net 4, 11, 16 71,300,909,433 72,525,179,606 46,836,763,606 49,864,662,793 Intangible assets 12 79,425,608 120,405,878 77,751,254 119,554,259 Negative goodwill, net 10 (560,610,845) - - - Deferred tax assets 26 206,553,758 196,040,835 194,144,418 181,199,758 Other non-current assets 13 1,662,149,747 1,856,418,884 1,178,005,024 1,329,079,287

Total non-current assets 73,169,738,639 75,303,967,630 67,792,035,055 60,799,189,846

Total assets 124,168,890,656 115,427,314,586 110,123,432,963 95,615,028,493

Consolidated The Company

(In Baht)

The accompanying notes are an integral part of these finanical statements.2


Liabilities and shareholders' equity Note 2005 2004 2005 2004

Current liabilitiesBank overdrafts and short-term loans from financial institutions 16 - 1,156,707,013 - - Trade accounts payable 4, 14 13,527,223,475 11,231,952,432 13,449,459,593 10,846,799,928 Current portion of long-term loans 11, 16 1,615,851,666 1,578,782,209 - - Other payables to subsidiary and related companies 4 275,454,645 1,895,824,316 477,782,429 26,521,200 Current portion of long-term payable to subsidiary company 4 - - - 8,902,046 Current tax payable 1,991,943,550 2,725,823,602 1,963,157,761 2,725,823,602 Accrued interest 652,421,684 710,073,362 198,374,422 326,228,231 Other current liabilities 15 2,009,690,640 1,137,736,302 1,815,583,071 902,178,239 Total current liabilities 20,072,585,660 20,436,899,236 17,904,357,276 14,836,453,246

Non-current liabilitiesLong-term payable to subsidiary company, net of current portion 4 - - - 258,159,334 Long-term loans, net of current portion 11, 16 19,857,004,148 38,705,576,784 11,452,539,000 28,503,617,248 Notes, net 16 14,395,131,082 - 14,395,131,082 - Deferred tax liabilities 26 2,825,449,078 2,263,736,720 2,772,780,402 2,204,683,957 Other non-current liabilities 17 166,266,421 445,798,886 332,484,214 515,981,952 Total non-current liabilities 37,243,850,729 41,415,112,390 28,952,934,698 31,482,442,491

Total liabilities 57,316,436,389 61,852,011,626 46,857,291,974 46,318,895,737

(In Baht)




Liabilities and shareholders' equity Note 2005 2004 2005 2004(Continued)

Shareholders'equityShare capital 18 Authorized share capital 20,400,278,730 20,400,278,730 20,400,278,730 20,400,278,730

Issued and paid-up share capital 20,400,278,730 20,400,278,730 20,400,278,730 20,400,278,730Premium on share capital 19 2,456,261,491 2,456,261,491 2,456,261,491 2,456,261,491Revaluation reserve 11, 19 15,049,071,881 17,970,643,983 15,049,071,881 17,970,643,983Retained earnings Appropriated Legal reserve 19 1,284,945,078 347,289,541 1,284,945,078 347,289,541 Other 244,500,000 244,500,000 244,500,000 244,500,000 Unappropriated 23,831,083,809 7,877,159,011 23,831,083,809 7,877,159,011Total equity of the Company's shareholders 63,266,140,989 49,296,132,756 63,266,140,989 49,296,132,756Minority interests 3,586,313,278 4,279,170,204 - - Total shareholders' equity 66,852,454,267 53,575,302,960 63,266,140,989 49,296,132,756

Total liabilities and shareholders' equity 124,168,890,656 115,427,314,586 110,123,432,963 95,615,028,493

- - - -


(In Baht)


Thai Oil Public Company Limited and its SubsidiariesStatements of incomeFor each of the years ended 31 December 2005 and 2004

Note 2005 2004 2005 2004

Revenues 32Revenue from sale of goods and rendering of services 4 249,111,048,871 184,801,485,213 246,213,166,931 176,992,937,435Reversal of allowance for impairment of assets 11, 29 2,894,068,664 - - - Gain from disposal of fixed assets 11 190,119,571 - - - Gain on foreign exchange - 542,532,749 - 337,172,016Other income 4, 20 702,697,061 957,200,317 1,556,039,545 1,355,208,526Share of profits from investments accounted for using the equity method 10 - - 9,157,384,865 432,168,897Total revenues 252,897,934,167 186,301,218,279 256,926,591,341 179,117,486,874

Expenses 32Cost of sale of goods and rendering of services 4, 21 225,702,614,808 164,732,051,261 231,290,158,476 158,788,146,835Selling and administrative expenses 4, 22 964,392,039 1,059,231,186 755,492,077 658,452,371Loss from disposal of fixed assets 11 - 147,929,879 305,386,593 56,943Loss on foreign exchange 1,032,429,451 - 734,036,531 - Loss from impairment of investment, net 10 279,496,900 - 279,496,900 - Loss from insurance claims 35 232,053,255 - - - Total Expenses 228,210,986,453 165,939,212,326 233,364,570,577 159,446,656,149

Profit before interest, financial and income tax expenses 24,686,947,714 20,362,005,953 23,562,020,764 19,670,830,725Interest and financial expenses 4, 25 (2,152,278,186) (2,299,182,632) (1,427,495,464) (1,619,170,761)

Income tax expense 26 (3,406,487,266) (2,966,844,546) (3,381,414,553) (2,979,014,301)

Profit after income tax 19,128,182,262 15,095,978,775 18,753,110,747 15,072,645,663Net profit of minority interest (375,071,515) (23,333,112) - -

Net profit 18,753,110,747 15,072,645,663 18,753,110,747 15,072,645,663

Basic earnings per share 27 9.19 7.82 9.19 7.82


(In Baht)


Thai Oil Public Company Limited and its SubsidiariesStatements of changes in shareholders' equity


Share Capital Premium Fixed reserve Retained

- issued and on share Revaluation Legal for capital earnings Minority

Notes paid-up capital reserve reserve increment (deficit) interests Net

Balance at 1 January 2004 18,965,278,730 431,749,000 20,418,574,798 2,000,000 244,500,000 (8,166,854,852) 4,382,287,098 36,277,534,774

Issue share capital 18 1,435,000,000 2,277,000,000 - - - - - 3,712,000,000

Expense for issuing share capital 18 - (252,487,509) - - - - - (252,487,509)

Depreciation of revaluation surplus of assets 11 - - (1,316,657,741) - - 1,316,657,741 - -

Deferred tax on revaluation of assets 26 - - (1,131,273,074) - - - - (1,131,273,074)

Net profit - - - - - 15,072,645,663 23,333,112 15,095,978,775

Legal reserve - - - 345,289,541 - (345,289,541) - -

Dividend payment - - - - - - (126,450,006) (126,450,006)

Balance at 31 December 2004 20,400,278,730 2,456,261,491 17,970,643,983 347,289,541 244,500,000 7,877,159,011 4,279,170,204 53,575,302,960

Depreciation of revaluation surplus of assets 11 - - (1,362,097,471) - - 1,362,097,471 - -

Realisation of revaluation surplus of assets 11 - - (449,303,572) - - 448,422,288 - (881,284)

Deferred tax on revaluation of assets 26 - - (1,110,171,059) - - - - (1,110,171,059)

Change in portion of minority interests - - - - - - (941,478,435) (941,478,435)

Net profit - - - - - 18,753,110,747 375,071,515 19,128,182,262

Legal reserve - - - 937,655,537 - (937,655,537) - -

Dividend payment - - - - - (3,672,050,171) (126,450,006) (3,798,500,177)

Balance at 31 December 2005 20,400,278,730 2,456,261,491 15,049,071,881 1,284,945,078 244,500,000 23,831,083,809 3,586,313,278 66,852,454,267

Consolidated

(In Baht)


Thai Oil Public Company Limited and its SubsidiariesStatements of changes in shareholders' equity (Continued)


Share capital Premium Fixed reserve Retained

- issued and on share Revaluation Legal for capital earnings

Notes paid-up capital reserve reserve increment (deficit) Net

Balance at 1 January 2004 18,965,278,730 431,749,000 20,418,574,798 2,000,000 244,500,000 (8,166,854,852) 31,895,247,676

Issue share capital 18 1,435,000,000 2,277,000,000 - - - - 3,712,000,000

Expense for issuing share capital 18 - (252,487,509) - - - - (252,487,509)

Depreciation of revaluation surplus of assets 11 - - (1,316,657,741) - - 1,316,657,741 -

Deferred tax on revaluation of assets 26 - - (1,131,273,074) - - - (1,131,273,074)

Net profit - - - - - 15,072,645,663 15,072,645,663

Legal reserve - - - 345,289,541 - (345,289,541) -

Balance at 31 December 2004 20,400,278,730 2,456,261,491 17,970,643,983 347,289,541 244,500,000 7,877,159,011 49,296,132,756

Depreciation of revaluation surplus of assets 11 - - (1,362,097,471) - - 1,362,097,471 -

Realisation of revaluation surplus of assets 11 - - (449,303,572) - - 448,422,288 (881,284)

Deferred tax on revaluation of assets 26 - - (1,110,171,059) - - - (1,110,171,059)

Net profit - - - - - 18,753,110,747 18,753,110,747

Legal reserve - - - 937,655,537 - (937,655,537) -

Dividend payment - - - - - (3,672,050,171) (3,672,050,171)

Balance at 31 December 2005 20,400,278,730 2,456,261,491 15,049,071,881 1,284,945,078 244,500,000 23,831,083,809 63,266,140,989

(In Baht)

The Company


Thai Oil Public Company Limited and its SubsidiariesStatements of cash flows

Notes 2005 2004 2005 2004

Cash flows from operating activitiesNet profit 18,753,110,747 15,072,645,663 18,753,110,747 15,072,645,663

Adjustments forDepreciation and amortization 6,367,608,522 6,072,483,599 4,946,662,986 5,099,019,755Unrealized loss (gain) on foreign exchange 611,120,211 (328,024,028) 263,132,517 (115,893,625)Interest expense 2,040,881,232 1,898,215,680 1,319,692,804 1,278,529,562(Decrease) increase in allowance for decline in value of inventories (21,168,731) 9,118,376 - - Share of profits from investments accounted for using the equity method - - (9,157,384,865) (432,168,897)Loss from insurance claims 232,053,255 - - - (Gain) loss on disposal of fixed assets (190,119,571) 147,929,879 305,386,593 56,943Loss from write off asset 10,403,320 - - - Gain from debt repurchase before maturity - (314,903,186) - (314,903,186)Realisation of deferred land lease and other income (24,949,170) (55,768,216) (153,242,324) (123,499,328)Income tax expense 3,406,487,266 2,966,844,546 3,381,414,553 2,979,014,301Reversal of allowance for impairment of assets (2,894,068,664) - - - Loss from impairment of invesment, net 279,496,900 - 279,496,900 - Net profit of minority interests 375,071,515 23,333,112 - - Profit provided by operating activities before changes in operating assets and liabilities 28,945,926,832 25,491,875,425 19,938,269,911 23,442,801,188

Changes in operating assets and liabilitiesTrade accounts receivable (8,079,386,124) (1,296,260,021) (6,869,146,323) (1,344,221,740)Other receivables from subsidiary and related companies 90,558,437 (17,509,009) (68,842,290) (13,325,468)Inventories (1,355,603,108) (5,303,757,512) (369,730,734) (5,779,423,897)Receivable from Oil Fuel Fund 2,783,425,737 (3,270,908,932) 2,783,425,737 (3,270,908,932)Other current assets (136,619,067) (696,047,973) (131,098,096) (693,190,785)Other non-current assets (9,835,966) (138,553,017) (26,492,338) (111,254,214)Trade accounts payable 2,648,649,832 2,240,053,410 2,597,994,286 3,165,917,857Other payables to subsidiary and related companies (487,417,420) 127,623,435 (226,800,151) (6,138,076)Other current liabilities 913,179,790 (451,231,760) 943,471,424 (443,699,800)Other non-current liabilities (203,003,734) (143,563,187) (66,977,066) (80,866,996) Income tax paid (4,705,379,124) (917,794,212) (4,699,099,675) (910,998,421) Net cash provided by operating activities 20,404,496,085 15,623,926,647 13,804,974,685 13,954,690,716


(In Baht)



Thai Oil Public Company Limited and its SubsidiariesStatements of cash flows (Continued)

Notes 2005 2004 2005 2004

Cash flows from investing activitiesDecrease in current investments 46,992,017 510,604,783 - - Decrease in long-term receivables from subsidiary companies 250,000,000 - 603,741,461 62,186,459 Increase in long-term loan to subsidiary and related companies - (118,260,000) - (118,260,000) Decrease (increase) in loans to savings co-operative of employees 11,666,189 (5,675,475) 11,666,189 (5,675,475)Payment of investments in shares of subsidiary and related companies (904,518,696) (3,760,417,752) (1,974,518,700) (3,760,417,752) Dividends received - - 154,549,994 154,549,994Payment of fixed assets (4,377,349,142) (382,652,789) (2,398,360,859) (326,791,752)Proceeds from insurance claims 899,390,590 - - - Proceeds from sales of liquid chemical tanker, plant and equipment 375,273,208 201,764,899 1,071,468,953 22,622 Increase in intangible assets (8,362,156) (20,139,717) (6,683,393) (20,139,717)Net cash used in investing activities (3,706,907,990) (3,574,776,051) (2,538,136,355) (4,014,525,621)

Cash flows from financing activitiesInterest paid (2,112,065,898) (1,565,451,918) (1,447,546,613) (956,264,674)Decrease in short-term loans from financial institutions (1,213,417,341) (17,733,817) - - Debt repurchase - (7,558,094,455) - (7,558,094,455)Proceed from long-term loans 11,351,626,805 80,262,400 11,351,626,805 - Repayments of long-term loans (30,586,205,095) (6,850,324,240) (28,503,607,814) (5,102,509,553)Proceeds from increase of share capital - 3,459,512,490 - 3,459,512,491Proceeds from notes issuance 14,245,431,109 - 14,245,431,109 - Dividend paid (3,798,500,177) (126,450,006) (3,672,050,171) - Net cash used in financing activities (12,113,130,597) (12,578,279,546) (8,026,146,684) (10,157,356,191)

Net increase (decrease) in cash and cash equivalents 4,584,457,498 (529,128,950) 3,240,691,646 (217,191,096)

Cash and cash equivalents at beginning of year 6,667,166,281 7,103,095,589 4,170,710,665 4,387,901,761

Cash and cash equivalents fromsubsidiary companies at the acquisition date - 93,199,642 - -

Cash and cash equivalents at end of year 5, 16 11,251,623,779 6,667,166,281 7,411,402,311 4,170,710,665

(In Baht)

The Company


Consolidated


Thai Oil Public Company Limited and its SubsidiariesStatements of cash flows (Continued)

Notes 2005 2004 2005 2004

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:1. Non-monetary item:Purchase of fixed assets on credit terms 4, 11 - 1,391,688,750 411,000,000 -

2. Acquisitions of subsidiary companiesDuring the year 2004 the Company purchased shares of two subsidiary companies, Thai Lube Base Public Company Limited andThai Paraxylene Company Limited. The fair value of assets and liabilities of these subsidiary companies taken into the Company's accountsat the acquisition date is as follows :

2004Thai Lube Base Public Thai Paraxylene

Company Limited Company Limited Total

Cash and cash equivalents 19 74 93 Trade accounts receivable 398 728 1,126 Inventories 1,289 242 1,531 Other assets 436 164 600 Property, plant and equipment, net 1,258 5,041 6,299 Trade accounts payable (526) (1,050) (1,576) Other current liabilities (629) (1,277) (1,906) Long-term debts (267) (2,252) (2,519) Acquisition prices 1,978 1,670 3,648 Less Cash and cash equivalents of the subsidiary companies (19) (74) (93) Net cash paid for the acquisitions of subsidiary companies 1,959 1,596 3,555

In Million Baht

(In Baht)

For each of the years ended December 31, 2005 and 2004



Thai Oil Public Company Limited and its Subsidiaries Notes to the financial statements For each of the years ended 31 December 2005 and 2004

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Note Contents

1 General information 2 Basis of preparation of financial statements 3 Significant accounting policies 4 Related party transactions and balances 5 Cash and cash equivalents 6 Current investments 7 Trade accounts receivable, net 8 Inventories, net 9 Other current assets 10 Investments in shares of subsidiary and related companies, net 11 Property, plant and equipment, net 12 Intangible assets 13 Other non-current assets 14 Trade accounts payable 15 Other current liabilities 16 Interest-bearing borrowings 17 Other non-current liabilities 18 Share capital 19 Reserves 20 Other income 21 Cost of sale of goods and rendering of services 22 Selling and administrative expenses 23 Pension fund 24 Registered provident funds 25 Interest expense and financial expenses 26 Deferred tax 27 Basic earnings per share 28 Dividends 29 Agreements 30 Promotional privileges 31 Contingent liabilities and commitments 32 Segment financial information - Consolidated 33 Insurance policy 34 Disclosures of financial instruments 35 Insurance claims 36 Reclassification of accounts 37 Others


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These notes form an integral part of the financial statements. The financial statements were authorised for issue by the directors on 10 February 2006.

1 General information

Thai Oil Public Company Limited, the “Company”, was incorporated in Thailand in 1961 and has its registered office as follows:

Sriracha office and refinery plant

: 42/1 Moo 1, Sukhumvit Road Km. 124, Tungsukla, Sriracha, Cholburi, Thailand.

Bangkok office : 123 Suntowers Building B, 12th Floor, Vibhavadi Rangsit Road,

Chomphon, Chatuchak, Bangkok, Thailand.

The Company was listed on the Stock Exchange of Thailand on 26 October 2004.

The Company is a company in the PTT Public Company Limited (“PTT”) group of companies. PTT was incorporated in Thailand and is the major shareholder of the Company, holding 49.54% of the Company’s issued and paid-up share capital.

The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are as follows:

The Company

The principal activity of the Company is oil refining operations, which commenced in 1964 following the completion of the first crude distillation complex. The Company comprises a highly sophisticated oil-refining complex with a capacity of approximately 220,000 barrels per day of crude oil and feedstock intake. Performance for a refinery is generally measured from capacity utilization or the number of barrels of crude and feedstock refined into petroleum products and the “gross refinery margin” (GRM) earned for each barrel of crude/feedstock processed. GRM is derived as the difference between the aggregate value of production and the aggregate cost of crude/feedstock inclusive of its transport cost and energy used in the refining process. This number is divided by the number of barrels of crude/feedstock to arrive at GRM/barrel and expressed in US Dollars. For oil movement logistics, the Company has its own “single buoy mooring”, crude receiving facilities as well as marine and land loading infrastructure for petroleum products. Product marine loading is via the jetty alongside the refinery’s shoreline while land movements are via either the connecting multi-product pipeline owned by Thai Petroleum Pipeline Co., Ltd. or lorry loading arms owned by the Company. The employees of the Company as at 31 December 2005 and 2004 numbered 751 and 733 respectively. The employee costs of the Company for each of the years then ended amounted to Baht 1,236.5 million and Baht 1,107.8 million, respectively.


13

The Subsidiary Companies Thaioil Marine Co., Ltd. was registered on 31 July 1998 and is a 99.99% owned subsidiary of Thai Oil Public Company Limited. The subsidiary company is engaged in transportation of petroleum oil products and chemical products by waterway. The numbers of employees of the subsidiary company at 31 December 2005 and 2004 were 142 and 166, respectively. The employee costs for each of the years then ended amounted to Baht 86.7 million and Baht 85.7 million, respectively. The registered office of the subsidiary company is located at 2/84 Moo 15, Old Railway Road, Bangchak, Phrakhanong, Bangkok, Thailand. Thaioil Power Co., Ltd. was registered on 17 September 1996. The subsidiary company is presently a 54.99% owned subsidiary of Thai Oil Public Company Limited. The principal business of the subsidiary company is to operate a power plant with a capacity to produce 118 Megawatt of electricity and approximately 168 tons of steam per hour. The registered office of the subsidiary company is located at 123 Suntowers Building B, 12th floor, Vibhavadi Rangsit Road, Chomphon, Chatuchak, Bangkok, Thailand. The subsidiary company has 11 directors and no employees. Its administrative work was performed by the Company as described in Note 4.3. Independent Power (Thailand) Co., Ltd. was registered on 18 November 1996 to develop and operate a 700 Megawatt combined cycle power plant. As at 31 December 2005, its shareholders were Thaioil Power Co., Ltd. (56% holding), Thai Oil Public Company Limited (24% holding) and PTT Public Company Limited (20% holding). The output is sold to the Electricity Generating Authority of Thailand (“EGAT”) under a 25 years Power Purchase Agreement as part of EGAT’s Independent Power Producer Program. The numbers of employees of the subsidiary company at 31 December 2005 and 2004 were 39 and 40, respectively. The employee costs for each of the years then ended amounted to Baht 42.0 million and Baht 30.5 million, respectively. The registered office of the subsidiary company is located at 42/3 Moo 1, Sukhumvit Road Km. 124, Tungsukla, Sriracha, Cholburi, Thailand. Thai Lube Base Public Co., Ltd. (“TLB”) was incorporated as a limited company in Thailand in 1993 and was transformed to a public company in 1996 to engage in refining and distribution of lube base oil. As discussed in Note 10, on 20 October 2004, the Company purchased all shares from the other shareholders of TLB. As a result, the Company became a sole major shareholder of this company holding 99.99% and TLB changed its status from a related company to a subsidiary company. The numbers of employees of the subsidiary company as at 31 December 2005 and 2004 were 143 and 142, respectively. The employee costs for each of the years then ended amounted to Baht 118.2 million and Baht 95.1 million, respectively. The registered office of the subsidiary company is 163/19 Moo 7, Tungsukla, Sriracha, Chonburi, Thailand.

Thai Paraxylene Co., Ltd. (“TPX”) was registered on 14 June 1996 to engage in manufacturing of paraxylene, one of the preliminary upstream petrochemical products. As discussed in Note 10, on 20 October 2004, the Company purchased all shares, both preferred shares and common shares from the other shareholders of TPX. As a result, the Company became a sole major shareholder holding 99.99% of shareholding in this company, and TPX changed its status from a related company to a subsidiary company. The numbers of employees of the subsidiary company as at 31 December 2005 and 31 December 2004 were 61 and 57, respectively. The employee costs for each of the years then ended amounted to Baht 61.3 million and Baht 51.0 million, respectively. The registered office of the subsidiary company is located at 105/12 Moo 2, Tungsukhla, Sriracha, Cholburi, Thailand.


14

2 Basis of preparation of financial statements

The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language. The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand. In 2005, the Group adopted the following new TAS which are relevant to its operations:

TAS 52 Events after the Balance Sheet Date

TAS 53 Provisions, Contingent Liabilities and Contingent Assets

The adoption of these new TAS has no material effect on the financial statements. The financial statements are presented in Thai Baht, unless otherwise stated. They are prepared on the historical cost basis except for the following assets which are stated at fair value: property, plant and equipment of the Company. The preparation of financial statements in conformity with TAS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods. Judgments made by management in the application of TAS that have a significant effect on the financial statements and in arriving at estimates with a significant risk of material adjustment in the following year are discussed in Note 11.


15

The consolidated financial statements relate to the Group. Details of the Company’s subsidiaries are as follows:

The consolidated financial statements have included the financial statements of Thai Lube Base Public Co., Ltd. and Thai Paraxylene Co., Ltd. as the subsidiary companies since 21 October 2004.

Significant intra-group transactions between the Company and its subsidiaries are eliminated on consolidation.

3. Significant accounting policies

(a) Basis of consolidation

Subsidiaries

Subsidiaries are those companies controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Business combinations

Business combinations are accounted for using the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

Type of business

Country of incorporation

Ownership interest (%) 2005 2004

Direct subsidiaries Thaioil Power Co., Ltd. Power generation Thailand 54.99 54.99 Independent Power (Thailand) Co., Ltd. Power generation Thailand 24.00 - Thaioil Marine Co., Ltd. Transportation of Thailand 99.99 99.99 petroleum oil products and chemical products Thai Lube Base Public Co., Ltd. Lube base oil

refinning

and distribution Thailand 99.99 99.99 Thai Paraxylene Co., Ltd. Paraxylene

manufacturing

Thailand

99.99

99.99 Indirect subsidiary Independent Power (Thailand) Co., Ltd. Power generation Thailand 56.00 56.00


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(b) Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rates ruling at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income.

(c) Derivative financial instruments

Derivative financial instruments such as forward exchange contracts, interest rate hedging agreements and crack spread swap are used to manage exposure to foreign exchange, interest rate and commodity price risks arising from operational, financing and investing activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Hedge of foreign currency transactions

At the balance sheet date, the Company records the gain or loss on forward foreign exchange contracts, which is the difference between the foreign exchange rate ruling at the end of the year and the forward contracted rate, in the statement of income.

Hedge of interest rates

The Company enters into interest rate cap option agreements with various investment-grade counter-parties to hedge against its U.S. Dollar floating interest rate loans. During periods where U.S. Dollars LIBOR interest rate does not exceed the caps, the Company pays interest at the prevailing U.S. Dollars LIBOR interest rates. The cap premium is recorded as deferred charges for interest rate hedging, and is amortised based on the straight-line method over the term of the agreements. A subsidiary company enters into interest rate swap agreements with various investment-grade counter-parties to hedge against its U.S Dollars with LIBOR interest rates. The differences under interest rate swaps are recorded as adjustments to the interest expense relating to the hedged loans in the statement of income.

Hedge of Crack Spread

From time to time depending on the market condition, the Company enters into Crack Spread Swap agreements to lock in margins between benchmark petroleum products and crude including gas oil/dubai, jet fuel/dubai and fuel oil/dubai. The differences between the fixed prices of the agreement and the settlement prices are recognised as gains or losses in current operations. The price differences of the outstanding agreements at the end of the year are accrued as income or expense for the year.

(d) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, saving accounts and current accounts and highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows.


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(e) Trade and other accounts receivable

Trade and other accounts receivable (including balances with related parties) are stated at their invoice value less allowance for doubtful accounts.

The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments coupled with a review of the current status of the existing receivables.

(f) Inventories

Raw materials and finished goods

Inventories are stated at the lower of cost and net realisable value.

Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of overheads. Cost of inventories is valued by the following methods: - Crude oil and feedstock which mostly belong to the Company are valued using last-in, first-out

method.

- Finished and semi-finished oil products which mostly belong to the Company are valued using monthly average cost method.

- Materials, spare parts and supplies are valued using average cost method.

- Gas oil for power plant of the subsidiary companies is valued using last-in, first-out method. Net realisable value is the estimated selling price in the ordinary course of business less the estimated additional costs to complete and to make the sale.

(g) Investments

Investments in subsidiaries

Investments in subsidiaries in the separate financial statements of the Company are accounted for using the equity method.

Investments in other debt and equity securities

Debt securities that the Group intends and is able to hold to maturity, consisting of promissory notes issued by financial institutions is stated at amortised cost less impairment losses (if any). The difference between the acquisition cost and redemption value of such debt securities is amortised using the effective interest rate method over the period to maturity. Equity security which is not marketable, comprising an investment in a related company, is stated at cost less impairment losses.


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(h) Property, plant and equipment

Property, plant and equipment of the Company, mainly consisting of refinery plant and machinery and equipment, are stated at revalued amounts. The revalued amount is the fair value determined on the basis of the property’s existing use at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. The subsidiaries’ property, plant and equipment, mainly consisting of power plants, oil and liquid chemical tankers, lube base refinery plant and paraxylene plant, are stated at cost less accumulated depreciation and impairment losses. Revalued assets

Revaluations are performed by independent professional valuers with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the balance sheet date. Any increase in value, on revaluation, is credited to the revaluation reserve unless it offsets a previous decrease in value recognised in the statement of income. A decrease in value is recognised in the statement of income to the extent it exceeds an increase previously recognised in the revaluation reserve. The revaluation surplus is realised as the revalued asset is used. The amount of the surplus realised is the difference between depreciation based on the revalued carrying value of the asset and depreciation based on the asset’s original cost. The transfer from revaluation surplus is made directly to retained earnings. Upon disposal of a revalued asset, any related revaluation surplus is transferred directly from the revaluation reserve to retained earnings and is not taken into account in calculating the gain or loss on disposal.

Depreciation and amortisation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment (except the power plant of Thaioil Power Company Limited which is depreciated by the units of production method). The estimated useful lives are as follows:

Buildings 10 - 25 Years Leasehold improvements 5 - 20 Years Refinery plant of the Company (starting from 1 October 1994, depreciated over the remaining estimated useful life) 20 Years Lube base oil refinery plant of a subsidiary company 16 - 20 Years Paraxylene plant of a subsidiary company 10 - 25 Years Power plant of a subsidiary company. (Independent Power (Thailand) Co., Ltd.) 25 Years Transmission facility 20 Years Machinery, equipment and plant equipment 5 - 20 Years Oil and liquid chemical tankers 9 - 14 Years Furniture, fixtures, office equipment and others 5 - 10 Years Vehicles 5 Years

Deferred charges are amortised over the estimated periods to which the benefits relate, which are principally in line with the agreements to which such deferred charges relate.


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(i) Intangible assets

Negative goodwill

Negative goodwill in a business combination represents the excess of the fair value of the Group’s share of the identifiable net assets acquired over the cost of acquisition. Negative goodwill is stated at cost less accumulated amortisation in the consolidated financial statements. Negative goodwill arising on acquisition of shares in subsidiaries in the Company’s separate financial statements is included in investments.

Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses (if any). Amortisation

Amortisation is charged to the statement of income on a straight-line basis from the date that negative goodwill and other intangible assets are available for use over the estimated useful lives of the assets, unless such lives are indefinite. Intangible assets with an indefinite useful life are not amortised but are systematically tested for impairment at each balance sheet date. The estimated useful lives are as follows:

Computer software 5 Years Licence fee 5-15 Years Negative goodwill 20 Years

(j) Impairment

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and as and when indicators of impairment are identified.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to equity, in which case it is charged to equity.

Calculation of recoverable amount

The recoverable amount of the Group’s investments in held-to-maturity securities carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of the assets’ net selling price and value in use. 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.


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Reversals of impairment

An impairment loss in respect of a held-to-maturity security or receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

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 does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(k) Discount on notes

Discount on notes, comprising the difference between proceeds from notes issuance and redemption value on maturity, is recognised in the statement of income over the period of the borrowings on an effective interest basis.

(l) Trade and other accounts payable

Trade and other accounts payable (including balances with related parties) are stated at cost.

(m) Employee benefits

Provident fund

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of income as incurred.

Pension fund

Obligations for contributions to the retirement gratuity fund plan are computed on the benefit formula at balance sheet date and are recognised as an expense in the statement of income. Benefits are payable upon retirement, disability, death or resignation.

(n) Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(o) Revenue

Revenue excludes value added taxes or other sales taxes and is arrived at after deduction of trade discounts.


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Sale of goods and services rendered

Revenue from sale of goods is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods.

Service income is recognised on the accrual basis principally based on services rendered. Rental income

Rental income from investment property is recognised in the statement of income on a straight-line basis over the term of the lease. Interest and dividend income

Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payments is established which in the case of quoted securities is usually the ex-dividend date.

(p) Expenses

Operating leases

Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease. Contingent rentals are charged to the statement of income in the accounting period in which they are incurred.

Repairs and maintenance

Expenditure on repairs and maintenance is charged to the statement of income in the period in which the expenditure is incurred. Expenditure of a capital nature is added to the cost of the related plant and equipment.

Finance costs

Interest expenses and similar costs are charged to the statement of income in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale.

(q) Corporate Income tax

Income tax on the profit or loss for the year comprises current and deferred tax.

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.


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Deferred tax

The Company and certain subsidiary companies record deferred tax. Deferred tax is provided, using the liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not recognised for goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Due to its registration with the Stock Exchange of Thailand, the Company has a right to reduction of its cooperate income tax rate from 30% to 25% of taxable income for the years 2005 to 2009. However, the income tax rate of its subsidiary companies is 30% of annual taxable income.

4. Related party transactions and balances

Related parties are those parties linked to the Company as subsidiary companies, directors, major shareholders, common shareholders or common directors.

The Group’s pricing policies for particular types of transactions are in the normal course of business on an arm’s-length basis and through negotiated agreements.

The subsidiary companies have various agreements with the Company and related companies. These include:

4.1 Power and Steam Purchase Agreements

On 19 December 1997 and 25 June 1998, a subsidiary company entered into Power and Steam Purchase Agreements for 25 years with the Company and two subsidiary companies whereby the subsidiary company will supply electric and steam energy to the said companies at the agreed quantity and price and with a minimum take obligation. On 1 April 2005 a subsidiary company entered into a Steam Purchase Agreement for 20 years with the Company whereby the subsidiary company will supply steam energy to the Company at the agreed quantity and price.


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4.2 Cost Reimbursement Agreements (a) On 1 April 1998, a subsidiary company entered into a Cost Reimbursement Agreement with the

Company covering the construction costs of natural gas pipeline facilities and the use of the pipeline facilities. Under the terms of the agreement, the subsidiary company agreed to absorb the total investment costs advanced by the Company on the basis and conditions stipulated in the agreement. The agreement will be in effect for a period of 25 years or until the termination of the Power Purchase Agreement detailed at Note 29 e) below, whichever is sooner.

(b) On 28 July 1998, a subsidiary company entered into three Cost Reimbursement Agreements with the

Company covering the construction costs of natural gas pipeline facilities, raw water pipeline and the use of land for the construction of a transmission line connecting the subsidiary company to the Electricity Generating Authority of Thailand (EGAT). Under the terms of these agreements, the subsidiary company agreed to share these investment costs on the bases and conditions stipulated in the agreements. These agreements will be in effect for a period of 25 years or until the termination of the Power Purchase Agreement entered into by the subsidiary company with EGAT, detailed at Note 29 e) below, whichever is sooner.

4.3 Services and Supplies Agreements

On 22 December 1997, 1 April 1998, 25 June 1998 and 28 July 1998, four subsidiary companies entered into agreements with the Company for the Company to provide the subsidiary companies with services and supplies on the scope, terms and conditions described in the agreements. These include the following:

(a) operate, maintain and repair the power generation plant to generate electricity and process steam to the

subsidiaries’ customers; (b) manage, control and arrange for handling, inspection, storage and procurement of materials, spare

parts, and equipment necessary for operations and maintenance of plant; and (c) provide supporting services such as financial and accounting services, personnel resources with

training and development of such personnel and managing such personnel to support the business operations of the subsidiary companies.

In consideration thereof, the subsidiary companies agree to pay certain fees based on the terms and conditions stipulated in the agreements.

4.4 Land Lease Agreements (a) On 24 November 1997, a subsidiary company entered into agreements with the Company to

lease/sublease certain parcels of land for a period of 25 years and 9 months ending in September 2022 with total annual rental of Baht 1.2 million. This rent will be adjusted every 5 years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company totaling approximately Baht 16.1 million.


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(b) On 16 July 1997 and 7 November 1997, a subsidiary company entered into agreements with the Company to sublease certain parcels of land for a period of 25 years and 10 months ending in September 2022 with total annual rental of Baht 2.8 million. This rent will be adjusted every 5 years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company totaling approximately Baht 31.7 million.

(c) On 7 August 1995 and 6 September 1995, the Company entered into agreements with a subsidiary

company to lease/sublease certain parcels of land for a period of 27 years and 8 months ending in September 2022 with total annual rental of Baht 8.6 million. This rent will be adjusted every 5 years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company totaling approximately Baht 116 million.

(d) On 28 August 1997 and 22 October 1997, the Company entered into agreements with a subsidiary

company to lease/sublease certain land for 25 years and 10 months up to September 2022 with total annual rental of Baht 4.7 million. This rent will be adjusted every 5 years. Under the terms of the agreements, the subsidiary company paid deposits and front-end fees to the Company amounting to approximately Baht 59.1 million.

4.5 Raw Materials and Finished Product Purchases and Sales Agreements

On 8 September 1997, the Company entered into raw materials and finished products purchases and sales agreements with a subsidiary company for a period of 20 years. The volume and purchase and sale price of raw materials and finished products will be based on the prices specified in the agreements. Subsequently, on 28 April 2005, the Company entered into raw material and finished products purchases and sales agreements with a subsidiary company and terminated the agreement dated 8 September 1997. The term of the agreement was commencing from 1 April 2005 onwards or shall be terminated if any party gives at least six months notice in writing to the other party. The volume and purchase and sale price of raw materials and finished products are specified in the agreements.

4.6 Sponsors Financial Support Agreement

On 13 September 2000, the Company entered into a Sponsors Financial Support Agreement with Thai Paraxylene Company Limited (“TPX”) and the major shareholder of TPX, whereby the Company and the major shareholder agreed to provide financial support (50% sharing each) to TPX either in the form of an advance payment and/or a subordinated loan if TPX has inadequate cash to repay its debts. The total financial support will not exceed U.S. Dollars 10 million. As discussed in Note 1, since the Company purchased all shares in TPX from the other shareholders of TPX on 20 October 2004, the loan limit under the Sponsors Financial Support Agreement was agreed to be changed from U.S. Dollars 10 million to U.S. Dollars 5 million. A major former shareholder of TPX withdrew from the Sponsors Financial Support Agreement with TPX and gave up its subordinated loan to TPX in the amount of U.S. Dollars 3 million plus accrued interest.


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4.7 Long-Term Maintenance Agreements

On 17 October 2001, a subsidiary company entered into two long-term combustion turbine maintenance agreements with two of its related companies. The agreements were named Scheduled Outage Parts and Repairs Agreement (for the supply and repair parts for the yearly scheduled outage) and Scheduled Outage Service Agreement (for the provision of maintenance services for the yearly scheduled outage). The subsidiary company is committed to pay for the parts and maintenance service cost as per the price specified in the agreements. These two agreements will begin on the signing date and continue until the second Major Scheduled Outage or the twelfth yearly Scheduled Outage.

4.8 By-Product Sale and Purchase Agreement

On 28 January 2005, the Company entered into by-product sale and purchase agreement with a subsidiary company. The term of the agreement was ten years commencing from 1 October 2004 onwards or terminable by mutual consent. The volume and purchase and sale prices of by-product are based on the prices specified in the agreement.

Transactions for each of the years ended 31 December 2005 and 2004 with related parties are summarised as follows:

Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) Revenues Revenue from sale of goods and rendering of services PTT Public Co., Ltd. Major shareholder 124,149,742 76,639,369 122,022,736 76,219,111 Thaioil Power Co., Ltd. Subsidiary and/or directorship - - - 1,404 Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 1,610 12,576 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - 5,855,306 26,624,584 7,645,997 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 378,516 2,225,877 - Independent Power (Thailand) Subsidiary Co., Ltd. and/or directorship - - 64,691 -


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Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) Interest income Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 3,741 7,616 Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 5,962 11,539 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - 2,437 15,995 3,893 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 16,990 54,629 1,923 Thai Petroleum Pipeline Co., Related company Ltd. and/or directorship 166,538 - 166,538 - Land lease income Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 2,600 2,600 Independent Power (Thailand) Subsidiary Co., Ltd. and/or directorship - - 5,812 6,533 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - 8,070 10,040 10,040 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 15,508 19,294 19,294 Other income PTT Public Co., Ltd. Major shareholder 4,200 10,250 4,200 10,035 Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 373,755 313,291 Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 4 - Independent Power (Thailand) Subsidiary Co., Ltd. and/or directorship - - 66,617 65,033 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - 152,426 320,737 194,255 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 85,716 175,699 105,875 Thai Petroleum Pipeline Co., Ltd. Related company and/or directorship 250,340 - 250,340 - Siemens Westinghouse Service Related company of Co., Ltd. subsidiary’s shareholder - 238 - - Siemens Limited Related company of subsidiary’s shareholder - 3,274 - - Disposal of fixed assets

Thai Paraxylene Co., Ltd. Subsidiary

and/or directorship - - 1,070,000 -


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Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) Expenses Purchases PTT Public Co., Ltd. Major shareholder 102,453,550 65,941,966 94,884,999 60,855,519 Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 1,537,318 1,663,475 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - 472,637 18,647,325 650,401 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 1,337,419 3,330,196 1,729,466 Other expenses PTT Public Co., Ltd. Major shareholder 24,559 76,823 23,529 74,755 Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 3,254 15,163 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 1,747 214,914 2,154 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 2,005 - Thai Petroleum Pipeline Co., Ltd. Related company and/or directorship 76,632 126,713 76,632 126,713 Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 49,092 77,247 Siemens Limited Related company of subsidiary’s shareholder 35,868 123,000 - - Purchase of assets Thaioil Power Co., Ltd. Subsidiary and/or directorship - - - 63,866 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - - 437,376 - Interest expenses PTT Public Co., Ltd. Major shareholder

1,622 10,762 1,622 9,936

Thaioil Power Co., Ltd. Subsidiary and/or directorship - - - 92 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - 6,469 7,544 8,521 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 3,034 - Directors’ remuneration 109,928 23,895 59,720 9,709


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Balances as at 31 December 2005 and 2004 with related parties are as follows: Trade accounts receivable Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) PTT Public Co., Ltd. Major shareholder 7,451,185 3,946,218 7,320,132 3,859,088 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 2,428,310 1,314,814 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - - 46,875 - Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - - 450 Total 7,451,185 3,946,218 9,795,317 5,174,352 Other receivables Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) PTT Public Co., Ltd. Major shareholder 9,985 - 9,985 - Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 40,551 25,265 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 37,189 17,616 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - - 31,680 15,322 Independent Power Subsidiary (Thailand) Co., Ltd. and/or directorship - - 8,722 3,303 Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 2,221 - Siemens Westinghouse Related company of Service Co., Ltd. subsidiary’s shareholder - 100,543 - - Total 9,985 100,543 130,348 61,506


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Long-term receivables Consolidated The Company 2005 2004 2005 2004

Relationship (In Thousand Baht)

Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 29,912 194,948 Thaioil Power Co., Ltd. Subsidiary and/or directorship - - - 153,807 Thai Lube Base Public Co., Ltd. Subsidiary and/or directorship - - - 34,899 Total - - 29,912 383,654 Less: portion due within one year ( - ) ( - ) ( 29,912) (132,726) Net - - - 250,928

On 3 July 2000, the Company sold 8 oil tankers to Thaioil Marine Co., Ltd. totaling Baht 805.6 million (including 7% value-added tax amounting to Baht 52.7 million). The associated receivable, which is repayable in monthly equal installments within 15 years commencing on 31 August 2000, bears interest at the interest rate of 12 month-fixed deposit of Krung Thai Bank Public Company Limited plus a margin of 2.9375% per annum since 1 November 2004. On 23 September 2005, Thaioil Marine Co., Ltd. paid a part of loan principal totaling Baht 135 million before the maturity of the agreement. Under the Business Reorganization Plan (BRP) of Thai Lube Base Public Company Limited (TLB) dated 16 October 2003, TLB is scheduled to repay trade debts to the Company and trade debts and under lifting debts to Thaioil Power Co., Ltd. (TP). After the debt restructuring process of TLB in the Business Reorganization Plan, TP recorded a loss from debt restructuring totaling Baht 200.1 million. The repayable conditions are as follows: Interest Rate Year Portion Repayable Trade debts MLR - 1.00% 2004 10% 2005 20% 2006 70% Under lifting debts MLR - 1.00% 2004 50% 2005 - 2008 12.5% On 10 May 2005, the Company fully settled the above long-term receivables with TLB amounting to Baht 34.9 million at discount.


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Subordinated loan Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 136,066 120,653

On 15 March 2004, the Company provided financial support of U.S. Dollars 3 million to Thai Paraxylene Co., Ltd. under the Sponsors Financial Support Agreement dated 13 September 2000. This loan bears interest at a rate not exceeding LIBOR plus 2% per annum. The loan and related interest will be repaid after all loans under “the Master Agreement” and “the Credit Agreements” of the subsidiary company have been fully repaid. Trade accounts payable Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) PTT Public Co., Ltd. Major shareholder 7,293,962 2,857,773 5,992,961 2,094,573 Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 136,427 140,088 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 1,922,860 176,471 Thai Lube Base Public Subsidiary Co., Ltd. and/or directorship - - 230,452 143,837 Total 7,293,962 2,857,773 8,282,700 2,554,969


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Other payables Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) PTT Public Co., Ltd. Major shareholder 982 319 982 - Thaioil Power Co., Ltd. Subsidiary and/or directorship - - 86 - Siemens Power Generation Related company of subsidiary’s shareholder 271,752 1,756,738 - - Siemens Westinghouse Related company of Service Co., Ltd. subsidiary’s shareholder - 5,700 - - Siemens Limited Related company of subsidiary’s shareholder - 123,000 - - Thai Lube Base Public Subsidiary Co., Ltd. and/or directorship - - 467,992 13,810 Thai Paraxylene Co., Ltd. Subsidiary and/or directorship - - 2,033 - Thai Petroleum Pipeline Related company and/or Co., Ltd. directorship 2,721 6,412 2,721 6,412 Thaioil Marine Co., Ltd. Subsidiary and/or directorship - - 3,968 6,299 Siemens AG Power Related company of Generation subsidiary’s shareholder - 3,655 - - Total 275,455 1,895,824 477,782 26,521 Long-term payable Consolidated The Company 2005 2004 2005 2004 Relationship (In Thousand Baht) Thai Lube Base Public Subsidiary Co., Ltd and/or directorship - - - 267,061 Less: portion due within one year ( - ) ( - ) ( - ) ( 8,902) Net - - - 258,159

Under the Business Reorganization Plan (BRP) of Thai Lube Base Public Co., Ltd. (TLB) dated 16 October 2003, the Company is required to comply with the conditions outlined in the Claims Settlement Package Agreement (CSP). The Company is liable for compensation under the Supplemental Supply and Offtake Agreement amounting to U.S. Dollars 6.9 million which is payable in thirteen installments of varying amounts between 31 March 2004 and 31 March 2010. The installments are payable twice a year, on 31 March and 30 September. On 10 May 2005, the Company fully settled the above long-term payables at a discount with TLB and also paid compensation according to item 3 in the CSP after TLB completed its BRP on 22 November 2004, related to the purchase of by product at the premium U.S. Dollars 4 per ton and in the quantities of 15,000 tons/month over a period of 10 years at a discounted amount of U.S. Dollars 5.4 million.


32

5. Cash and cash equivalents As at 31 December, cash and cash equivalents consisted of: Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Cash on hand 2,502 1,926 841 458 Savings accounts and current accounts 9,923,240 5,879,626 6,410,561 4,170,253 Fixed deposits 317,182 3 - - Promissory notes issued by financial institutions

8,700

785,611

-

-

Treasury bills 1,000,000 - 1,000,000 - Total 11,251,624 6,667,166 7,411,402 4,170,711 As at 31 December 2005 and 2004, savings deposits, current deposits and fixed deposits of subsidiary companies totaling Baht 2,621 million and Baht 1,582 million, respectively are pledged as collateral for credit facilities as discussed in Note 16. The subsidiary companies can withdraw these deposits when needed as specified in the loan agreements. 6. Current investments Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Fixed deposits 402,777 - - - Promissory notes issued by financial institutions 18,710 468,479 - - Total 421,487 468,479 - - Subsidiary companies have current investments in fixed deposits and promissory notes with terms over 3 months but not over one year with several local financial institutions. These current investments bear interest at rates of 2.25% to 4.00% per annum and 0.75% to 1.125% per annum as at 31 December 2005 and 2004, respectively. These current investments are pledged as collateral for subsidiary companies’ credit facilities as discussed in Note 16. Subsidiary companies can redeem the current investments when needed.


33

7. Trade accounts receivable, net

The normal credit term granted by the Group is between 19 days and 60 days.

8. Inventories, net

As at 31 December 2005 and 2004, crude oil and feedstock valued using the last-in, first-out method at the lower of cost or net realisable value, were Baht 1,014 million and Baht 349 million, respectively, lower than cost calculated using the first-in, first-out method. As at 31 December 2005 and 2004 the Group’s inventories as stated above included a legal reserve amounting to Baht 7,466 million and Baht 6,029 million , respectively.

Consolidated The Company Note 2005 2004 2005 2004

(In Thousand Baht) Trade accounts receivable from related parties 4 7,451,185 3,946,218 9,795,317 5,174,352Trade accounts receivable from other parties 10,354,524 5,886,191 6,407,448 4,167,294Less allowance for doubtful accounts ( 320) - - - Total 17,805,389 9,832,409 16,202,765 9,341,646

Consolidated The Company 2005 2004 2005 2004

( In Thousand Baht) Within credit terms 17,795,656 9,787,811 16,202,765 9,341,646Overdue:

Less than 6 months 7,625 43,554 - - 6-12 months 73 174 - - Over 12 months 2,355 870 - -

17,805,709 9,832,409 16,202,765 9,341,646Less allowance for doubtful accounts ( 320) - - - Net 17,805,389 9,832,409 16,202,765 9,341,646


(In Thousand Baht) Inventory on hand Crude oil and feedstock 8,387,956 6,372,723 7,080,567 6,068,514Materials, spare parts and supplies 913,455 876,094 650,860 615,439Finished and semi-finished oil products 4,376,289 4,061,928 3,423,789 3,112,822Gas oil for power plant 6,624 8,096 - - Goods in transit - Crude oil 5,309,679 6,296,690 5,309,679 6,296,690- Materials, spare parts and supplies 6,928 8,628 6,928 8,628Total 19,000,931 17,624,159 16,471,823 16,102,093


34

9. Other current assets

10. Investments in shares of subsidiary and related companies, net Investment in shares of subsidiary and related companies as at 31 December 2005 and 2004 are as follows: Paid-up capital Percentage of (In Thousand Baht)

(In Million Baht) Holding Cost Consolidated The Company

Type of Business 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004

Investments recorded by

the equity method:

- Subsidiary companies

Thaioil Power Co., Ltd. Power generation 2,810 2,810 54.99 54.99 1,545,500 1,545,500 - - 3,277,020 3,035,719

Independent Power

(Thailand) Co., Ltd. Power generation

- Indirectly held by Thaioil

Power Co., Ltd. and equity

included as part of Thaioil

Power Co., Ltd. 1,771 1,771 56.00 56.00 - - - - - -

- Directly held by the

Company - - 24.00 - 487,968 - - - 650,765 -

Thaioil Marine Co., Ltd. Transportation

of petroleum oil

products and

chemical products 630 630 99.99 99.99 630,000 630,000 - - 501,862 408,567

Thai Paraxylene Co., Ltd. Paraxylene

manufacturing

5,491

4,421

99.99

99.99

3,551,230

2,481,230

-

-

7,330,351

2,257,442

Thai Lube Base Public Co., Ltd. Lube base oil

refining

2,833

2,833

99.99

99.99

1,978,346

1,978,346

-

-

7,127,996

2,625,463

Total - - 18,887,994 8,327,191


(In Thousand Baht) Prepayment expense 394,714 302,253 259,497 204,411Current portion of loan to savings co-operative of employees 31,358 29,525 31,358 29,525Other accounts receivable 85,643 71,162 42,078 60,740Value-added tax receivable 670,705 706,856 490,378 465,089Others 94,710 304,762 29,229 231,361Total 1,277,130 1,414,558 852,540 991,126


35

Paid-up capital Percentage of (In Thousand Baht)

(In Million Baht) Holding Cost Consolidated The Company

Type of Business 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004

Investments recorded by

cost method:

- Related company

Thai Petroleum Pipeline Transportation

Co., Ltd. by pipeline 8,268 4,177 9.43 8.69 779,497 362,945 779,497 362,945 779,497 362,945

Total 779,497 362,945 779,497 362,945

Less: allowance for loss on

impairment of investments ( 779,497) (250,000) ( 779,497) (250,000)

Net - 112,945 - 112,945

Total - 112,945 18,887,994 8,440,136

Investment accounted for using the equity method

The Company received dividend income from Thaioil Power Company Limited of Baht 154.5 million for each year in 2005 and 2004. Thai Petroleum Pipeline Co., Ltd. On 9 January 2004, the Company purchased 1,129,453 preferred shares of Thai Petroleum Pipeline Co., Ltd. (THAPPLINE) with a par value of Baht 100 each, equivalent to Baht 113 million. At the extraordinary shareholders’ meeting of THAPPLINE held on 26 September 2005, the shareholders unanimously approved the increase of 43,015,000 new preferred shares with a par value of Baht 100 each totaling Baht 4,301.5 million. The Company is entitled to purchase 4,165,516 preferred shares totaling Baht 416.55 million. In 2005, the Company recorded an additional Baht 529.5 million allowances for loss on impairment of investments in shares of THAPPLINE, bringing the total allowance recorded to Baht 779.5 million, since THAPPLINE has recorded recurring losses for consecutive years. Subsequently in the fourth quarter 2005, THAPPLINE repaid the balance of a tariff prepayment with interest of Baht 416.3 million to the Company as discussed in Note 29 a. Consequently, the Company reversed allowance for impairment of Baht 250 million and presented the amount net off the additional provision.


(In Thousand Baht) Net book value at 1 January - - 8,327,191 4,401,732Share of net profits of investments - equity method - - 9,157,385 432,169Acquisitions - - 1,557,968 3,647,840Dividend income - - (154,550) (154,550)Net book value at 31 December - - 18,887,994 8,327,191


36

Thai Lube Base Public Co., Ltd. In the past, Thai Lube Base Public Co., Ltd. was an associate of the Company. In 1996, the Company recorded an investment of Baht 1,900 million at cost in relation to the acquisition of 38% of Thai Lube Base Public Co., Ltd.’s issued share capital. In subsequent periods, the Company recorded its share of losses in Thai Lube Base Public Co., Ltd. until the carrying value of the investment had been reduced to Baht Nil. In December 2003, as part of a Business Reorganization Plan approved by the Central Bankruptcy Court, Thai Lube Base Public Co., Ltd. reduced its registered share capital in proportion to the holding of each existing shareholder from 500,000,000 common shares with a par value of Baht 10 each, equivalent to Baht 5,000 million, to 100,000 common shares with a par value of Baht 10 each, equivalent to Baht 1 million. Thai Lube Base Public Co., Ltd. then increased its registered share capital to be Baht 2,832 million by issuing 283,195,915 common shares of Baht 10 each. Under the terms of the Business Reorganization Plan, Thai Lube Base Public Co., Ltd. offered 175,581,468 of these newly issued common shares at their par value of Baht 10 each to all of its secured and unsecured financial institution creditors in proportion to the amounts outstanding. The above changes resulted in a dilution of the Company’s shareholding in Thai Lube Base Public Co., Ltd. from 38% to 0.02%. On 29 December 2003, the Company paid Baht 367,905 to purchase a further 36,790,469 common shares in Thai Lube Base Public Co., Ltd. with a par value of Baht 10 each as part of the Business Reorganization Plan, which included provisions under a Claims Settlement Package Agreement. Title to these shares was transferred to the Company on 7 January 2004, increasing the Company’s shareholding in Thai Lube Base Public Co., Ltd. to 17%. In June 2004, Thai Lube Base Public Co., Ltd. issued further shares to another shareholder as part of the Business Reorganization Plan, reducing the Company’s shareholding to 13%. On 16 September 2004, the Company entered into a share purchase agreement with the other shareholders of Thai Lube Base Public Co., Ltd. to acquire all of their shares in this company for a total purchase price of U.S. Dollars 47.85 million (Baht 1,978 million), which was nearly the fair value. Subsequently on 20 October 2004 the Company completed an acquisition as per conditions stipulated in the share purchase agreement, increasing the Company’s shareholding in Thai Lube Base Public Co., Ltd. to 99.99%. Therefore, this company changed its status from a related company to a subsidiary company. Thai Paraxylene Co., Ltd. On 16 September 2004, the Company entered into a share purchase agreement with the other shareholders of Thai Paraxylene Co., Ltd. to acquire all of their shares in this company for a total purchase price of U.S. Dollars 40.39 million (Baht 1,670 million), which was nearly the fair value. Subsequently, on 20 October 2004 the Company completed an acquisition as per conditions stipulated in the share purchase agreement, increasing the Company’s shareholding in Thai Paraxylene Co., Ltd. to 99.99%. Therefore, this company changed its status from a related company to a subsidiary company.


37

At the ordinary shareholders’ meeting held on 15 March 2005, the shareholders of Thai Paraxylene Co., Ltd. unanimously approved the increase in authorised share capital (common shares) by Baht 1,070 million from Baht 1,502 million to Baht 2,572 million. The increase in authorised share capital was registered with the Ministry of Commerce on 8 April 2005.

At the extraordinary shareholders’ meeting of Thai Paraxylene Co., Ltd. held on 18 April 2005, the shareholders unanimously approved the decrease of its preferred shares in the amount of Baht 2,918.44 million. At present, the company is in the process of getting approval from lenders under the loan facility agreements to decrease such preferred shares.

Independent Power (Thailand) Co., Ltd. On 16 December 2004, the Company entered into an agreement to purchase shares of Independent Power (Thailand) Co., Ltd. from Unocal Asia Pacific Ventures Ltd., a former shareholder, in the amount of 42,504,000 shares (equivalent to 24% of total shares of this company) at the price of U.S. Dollars 12.75 million. On 11 March 2005, the Company completed the acquisition as per the conditions stipulated in the above agreement. The Company recognised the difference between the cost of acquisition and the fair value of Baht 585 million as negative goodwill in the balance sheet. The negative goodwill is amortised by straight line basis over its 20 years estimated useful life. In 2005, the Company amortised such negative goodwill of Baht 24 million, resulting in the remaining balance of the aforementioned negative goodwill of Baht 561 million as at 31 December 2005.


38

11. Property, plant and equipment, net

Balance as at Reversal of Balance as at 1 January allowance for Transfer in/ 31 December 2005 Additions impairment (Transfer out) Disposals 2005 (In Thousand Baht) Consolidated At Cost Land 1,926,417 486,796 - - - 2,413,213 Buildings 1,028,383 - - 2,483 - 1,030,866 Leasehold improvements 4,795 - - - - 4,795 Refinery plant 64,144,760 - - ( 1,786,588) - 62,358,172 Paraxylene plant 7,232,650 - - 1,374,030 - 8,606,680 Power plant 15,312,262 131,475 - 921,258 811,684 15,553,311 Transmission facility 192,637 - - - - 192,637 Machinery, equipment and plant equipment 1,978,048 403,870 - 519,305 920,606 1,980,617 Oil and liquid chemical tankers 690,664 - - - 162,868 527,796 Furniture, fixtures, office equipment and others 411,412 17,349 - 9,476 9,596 428,641 Vehicles 25,762 422 - - 3,213 22,971 Construction in progress 1,894,256 2,335,993 - ( 1,802,030) 215 2,428,004 Sub total 94,842,046 3,375,905 - ( 762,066) 1,908,182 95,547,703 Less accumulated depreciation Buildings 514,840 39,105 7,132 - - 561,077 Leasehold improvements 873 227 - - - 1,100 Refinery plant 31,085,687 2,627,266 274,543 ( 1,022,942) - 32,964,554 Paraxylene plant

1,209,321 419,375 - - - 1,628,696

Power plant 3,154,139 680,700 - - 146,022 3,688,817 Transmission facility 58,996 9,632 - - - 68,628 Machinery, equipment and plant equipment 796,742 190,709 344 - 340,829 646,966 Oil and liquid chemical tankers 153,445 38,550 - - 21,428 170,567 Furniture, fixtures, office equipment and others 337,301 18,435 2,544 - 4,968 353,312 Vehicles 11,692 4,222 251 - 2,118 14,047 Sub total 37,323,036 4,028,221 284,814 (1,022,942) 515,365 40,097,764 Less allowance for impairment in value

Land 397,176 - - - - 397,176

Buildings 72,343 - - - 72,343 - Refinery plant 3,056,228 - - - 3,056,228 - Machinery, equipment and office equipment 453 - - - 453 - Furniture, fixtures, plant equipment and others 4,970 - - - 4,970 - Vehicles 295 - - - 295 - Sub total 3,531,465 - - - 3,134,289 397,176 Net 53,987,545 55,052,763


39

Balance as at Balance as at 1 January Transfer in/ 31 December 2005 Additions (Transfer out) Disposals 2005

(In Thousand Baht) Revaluation surplus Land 242,157 - - - 242,157 Refinery plant, machinery and equipment 33,126,070 - - 834,608 32,291,462 Sub total 33,368,227 - - 834,608 32,533,619 Less accumulated depreciation 14,830,592 1,840,185 - 385,304 16,285,473 Net 18,537,635 16,248,146 Property, Plant and Equipment, net

72,525,180

71,300,909


40

Balance as at Addition from

acquisitions of two subsidiaries

Balance as at 1 January Transfer in/ 31 December 2004 Additions (Transfer out) Disposals 2004 (In Thousand Baht) Consolidated At Cost Land 1,820,251 106,166 - - - 1,926,417 Buildings 715,883 - 250,819 61,681 - 1,028,383 Leasehold improvements 4,795 - - - - 4,795 Refinery plant 57,108,495 - 6,812,747 223,518 - 64,144,760 Paraxylene plant - - 7,232,650 - - 7,232,650 Power plant 15,188,418 - - 123,844 - 15,312,262 Transmission facility 192,637 - - - - 192,637 Machinery, equipment and plant equipment

1,711,802

7,524

144,157

114,565

-

1,978,048

Oil and liquid chemical tankers 1,021,173 90,126 - - 420,635 690,664 Furniture, fixtures, office equipment and others

377,939

6,427

102,015

9,600

84,569

411,412

Vehicles 21,168 4,530 4,602 - 4,538 25,762 Construction in progress 744,865 1,559,569 296 (410,474) - 1,894,256 Sub total 78,907,426 1,774,342 14,547,286 122,734 509,742 94,842,046 Less accumulated depreciation Buildings 393,852 33,950 87,038 - - 514,840 Leasehold improvements 613 260 - - - 873 Refinery plant 26,138,294 2,587,072 2,360,321 - - 31,085,687 Paraxylene plant - 74,848 1,134,473 - - 1,209,321 Power plant 2,494,855 659,284 - - - 3,154,139 Transmission facility 50,015 8,981 - - - 58,996 Machinery, equipment and plant equipment

542,974

153,310

100,458

-

-

796,742

Oil and liquid chemical tankers 176,635 53,434 - - 76,624 153,445 Furniture, fixtures, office equipment and others

308,596

16,896

90,914

-

79,105

337,301

Vehicles 10,362 4,269 1,386 - 4,325 11,692 Sub total 30,116,196 3,592,304 3,774,590 - 160,054 37,323,036


41

Balance as at Addition from

acquisition of two subsidiaries

Balance as at 1 January Transfer in/ 31 December 2004 Additions (Transfer out) Disposals 2004 (In Thousand Baht) Less allowance for impairment in value

Land 397,176 - - - - 397,176 Buildings - - 72,343 - - 72,343 Refinery plant - - 3,056,228 - - 3,056,228 Machinery, equipment and plant equipment

-

-

453

-

-

453

Furniture, fixtures, office equipment and others

-

-

4,970

-

-

4,970

Vehicles - - 295 - - 295 Sub total 397,176 - 3,134,289 - - 3,531,465 Net 48,394,054 53,987,545 Revaluation surplus Land 242,157 - - - - 242,157 Refinery plant, machinery and equipment 33,126,070 - - - - 33,126,070 Sub total 33,368,227 - - - - 33,368,227 Less accumulated depreciation 12,949,652 1,880,940 - - - 14,830,592 Net 20,418,575 18,537,635 Property, Plant and Equipment, net

68,812,629

72,525,180


42

Balance as at Balance as at 1 January Transfer in/ 31 December 2005 Additions (Transfer out) Disposals 2005 (In Thousand Baht) The Company At Cost Land 1,865,704 486,796 - - 2,352,500 Buildings 765,438 - - - 765,438 Refinery plant 57,332,013 411,000 161,892 1,759,217 56,145,688 Machinery, equipment and plant equipment 899,758 - 20,690 1,944 918,504 Furniture, fixtures, office equipment and others 254,940 26 9,280 4,185 260,061 Vehicles 12,195 - - 2,613 9,582 Construction in progress 306,462 1,911,539 ( 191,862) 215 2,025,924 Sub total 61,436,510 2,809,361 - 1,768,174 62,477,697 Less accumulated depreciation Buildings 423,714 32,119 - - 455,833 Refinery plant 28,704,558 2,518,966 - 833,678 30,389,846 Machinery, equipment and plant equipment 366,708 56,577 - 1,944 421,341 Furniture, fixtures, office equipment and others 209,731 9,950 - 2,548 217,133 Vehicles 7,595 1,794 - 1,639 7,750 Sub total 29,712,306 2,619,406 - 839,809 31,491,903 Less allowance for impairment in value- land 397,176 397,176 Net 31,327,028 30,588,618 Revaluation surplus Land 242,157 - - - 242,157 Refinery plant, machinery and equipment 33,126,070 - - 834,608 32,291,462 Sub total 33,368,227 - - 834,608 32,533,619 Less accumulated depreciation 14,830,592 1,840,185 - 385,304 16,285,473 Net 18,537,635 16,248,146 Property, Plant and Equipment, net 49,864,663 46,836.764


43

Balance as at Balance as at 1 January Transfer in/ 31 December 2004 Additions (Transfer out) Disposals 2004 (In Thousand Baht) The Company At Cost Land 1,695,822 169,882 - - 1,865,704 Buildings 703,757 - 61,681 - 765,438 Refinery plant 57,108,495 - 223,518 - 57,332,013 Machinery, equipment and plant equipment 795,878 - 103,880 - 899,758 Furniture, fixtures, office equipment and others

322,698

-

9,600

77,358

254,940

Vehicles 12,195 - - - 12,195 Construction in progress 548,230 156,911 ( 398,679) - 306,462 Sub total 61,187,075 326,793 - 77,358 61,436,510 Less accumulated depreciation Buildings 391,608 32,106 - - 423,714 Refinery plant 26,138,294 2,566,264 - - 28,704,558 Machinery, equipment and plant equipment 321,355 45,353 - - 366,708 Furniture, fixtures, office equipment and others

278,638

8,371

-

77,278

209,731

Vehicles 5,190 2,405 - - 7,595 Sub total 27,135,085 2,654,499 - 77,278 29,712,306 Less allowance for impairment in value- land

397,176

397,176

Net 33,654,814 31,327,028 Revaluation surplus Land 242,157 - - - 242,157 Refinery plant, machinery and equipment 33,126,070 - - - 33,126,070 Sub total 33,368,227 - - - 33,368,227 Less accumulated depreciation 12,949,652 1,880,940 - - 14,830,592 Net 20,418,575 18,537,635 Property, Plant and Equipment, net 54,073,389 49,864,663

The above depreciation included depreciation on the revaluation increment included in property, plant and equipment for each of the years ended 31 December 2005 and 2004 of Baht 1,840.2 million and Baht 1,880.9 million, respectively.


(In Million Baht) Statement of income Depreciation 5,868 5,473 4,460 4,535


44

In 2003, a subsidiary company recorded an allowance for impairment in value of fixed assets amounting to approximately Baht 3,378 million. In 2004, the subsidiary company had successfully complied with the Business Reorganization Plan. On 22 November 2004, the Central Bankruptcy Court had issued an order to lift the Business Reorganization requirement of the subsidiary company. In addition, as a result of becoming a wholly owned subsidiary of the Company in 2004 and because the businesses of both the Company and the subsidiary company are complementing and supporting each other in term of their production, the efficiency of operations of the subsidiary company is higher than before. Profits derived from operations of the subsidiary company in 2005 and 2004 are Baht 1,752 million and Baht 1,201 million, respectively, while cash flows from operations for those corresponding years are Baht 787 million and Baht 315 million, respectively. The aforementioned operating results and cash flows indicate that indicative factors of impairment of fixed assets have no longer existed. Accordingly, the management of the subsidiary company has reversed the remaining balance of allowance for impairment in value of fixed assets totaling Baht 2,894 million as income. This income is included in the consolidated statement of income of the Company for the year ended 31 December 2005. A portion of a subsidiary company’s machinery and equipment with net book value as at 31 December 2004 of approximately Baht 277.6 million, was sequestered by the Excise Department for the disputed unpaid excise tax as mentioned in Note 31 e). However the Excise Department has allowed the company to use that machinery and equipment for its operations. On 25 August 2005, the Excise Department ordered to release such sequestered machinery and equipment. On 1 April 2005, the Company sold the Mixed-Xylenes Production Unit and Platformer 2 Unit with the attached equipment to a subsidiary company at an appraised value of Baht 1,070 million. On 26 December 2005, the Company purchased Power and Steam Production Unit, Seawater Desalination Unit and Demineralization Unit together with attached equipments from a subsidiary company at an appraised value of Baht 437 million. In 2005, a subsidiary company sold its two oil and liquid chemical tankers with the attached equipment and spare parts at the price of Baht 211 million. As at 31 December 2005 and 2004, the gross carrying amounts of certain fully depreciated fixed assets which are still in active use totaled approximately Baht 750.5 million and Baht 703.8 million in the consolidated financial statements, respectively, and totaled approximately Baht 554.5 million and Baht 528.4 million in the Company’s financial statements, respectively. In 2002, the Company engaged an independent appraiser to appraise land (using the fair market value method), and refinery plant, machinery and equipment (using the income approach method to determine the value in use), whose report was dated 30 January 2003. According to this report, the value of land decreased by Baht 544.2 million: Of this, Baht 147.0 million was offset against the existing revaluation surplus of land in equity and the remaining amount of Baht 397.2 million was charged to provision for impairment of assets in the statement of income for the year ended 31 December 2002. The value of refinery plant, machinery and equipment, according to this report, approximated the carrying value of the assets at 31 December 2002. The Company records revaluation increments in the “Revaluation reserve” account, which is presented under “Shareholders’ Equity” in the balance sheets. The revaluation reserve is not available for dividend distribution. The subsidiary companies’ land, power plant, liquid chemical tankers and certain assets are mortgaged as collateral for long-term loans as discussed in Note 16. As at 31 December 2005 and 2004, the accumulated balance of borrowing costs capitalized and included as part of fixed assets of two subsidiary companies totaled approximately Baht 1,189.5 million. In 2005 and 2004, no borrowing costs were capitalized.


45

12. Intangible assets

Consolidated Licence fee

Computer software Total

(In Thousand Baht) Cost At 1 January 2004 539,143 31,630 570,773 Additions 17,160 2,954 20,114 Disposals - - - At 31 December 2004 556,303 34,584 590,887 Additions 4,996 3,366 8,362 Disposals - ( 15) ( 15) At 31 December 2005 561,299 37,935 599,234 Accumulated amortisation At 1 January 2004 393,063 16,916 409,979 Amortisation charge for the year 53,616 6,886 60,502 Disposals - - - At 31 December 2004 446,679 23,802 470,481 Amortisation charge for the year 43,091 6,239 49,330 Disposals - ( 3) ( 3) At 31 December 2005 489,770 30,038 519,808 Net book value At 31 December 2004 109,624 10,782 120,406 At 31 December 2005 71,529 7,897 79,426


46

The Company Licence fee

Computer software Total

(In Thousand Baht) Cost At 1 January 2004 539,143 24,248 563,391 Additions 17,160 2,954 20,114 Disposals - - - At 31 December 2004 556,303 27,202 583,505 Additions 4,157 2,526 6,683 Disposals - - - At 31 December 2005 560,460 29,728 590,188 Accumulated amortisation At 1 January 2004 393,063 11,779 404,842 Amortisation charge for the year 53,616 5,493 59,109 Disposals - - - At 31 December 2004 446,679 17,272 463,951 Amortisation charge for the year 42,994 5,492 48,486 Disposals - - - At 31 December 2005 489,673 22,764 512,437 Net book value At 31 December 2004 109,624 9,930 119,554 At 31 December 2005 70,787 6,964 77,751


47

13. Other non-current assets Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Transmission facility transferred to EGAT, net 175,563 196,843 - - Deferred natural gas pipeline facilities, raw water pipeline and the use of land, net 310,338 325,836 155,278 164,067 Deferred land lease arrangement and registration fees, net 723,593 762,336 721,393 762,336 Deferred charges for interest rate hedging, net 76,473 104,306 76,473 104,306 Other deferred charges, net 266,387 351,790 183,956 260,560 Refundable deposits and others 109,796 115,308 40,905 37,810 Total 1,662,150 1,856,419 1,178,005 1,329,079 14. Trade accounts payable

15. Other current liabilities

Consolidated The Company Note 2005 2004 2005 2004

(In Thousand Baht) Trade accounts payable to related parties 4 7,293,962 2,857,773 8,282,700 2,554,969Trade accounts payable to other parties 6,233,261 8,374,179 5,166,760 8,291,831Total 13,527,223 11,231,952 13,449,460 10,846,800


(In Thousand Baht)

Accrued operating expense 162,495 205,172 79,283 147,889 Excise duty payable 633,748 571,584 633,748 571,584 Oil fuel fund payable 436,190 18,769 436,190 18,769 Other payable 542,477 125,812 482,169 102,355 Value-added tax payable 86,516 48,069 - - Others 148,265 168,330 184,193 61,581 Total 2,009,691 1,137,736 1,815,583 902,178


48

16. Interest-bearing borrowings 16.1 Interest-bearing borrowings have details of classification as current and non-current under secured and unsecured portion as follows:

The period to maturity of interest-bearing borrowings is as follows:

The currency denomination of interest-bearing borrowings is as follows:


(In Thousand Baht) Current Bank overdrafts and short-term loans from financial institutions - secured - 1,156,707 - - - unsecured - - - - - 1,156,707 - - Current portion of long-term loans - secured 1,615,852 1,578,782 - - - unsecured - - - - 1,615,852 1,578,782 - - Non-current Long-term loans, net of current portion - secured 8,404,465 38,705,577 - 28,503,617- unsecured 11,452,539 - 11,452,539 - 19,857,004 38,705,577 11,452,539 28,503,617 Unsecured notes 14,395,131 - 14,395,131 - Total 35,867,987 41,441,066 25,847,670 28,503,617


(In Thousand Baht) Within one year 1,615,852 2,735,489 - - After one year but within five years 15,291,573 25,551,966 7,759,095 16,925,509 After five years 18,960,562 13,153,611 18,088,575 11,578,108 Total 35,867,987 41,441,066 25,847,670 28,503,617


(In Thousand Baht) Thai Baht 5,893,823 11,172,423 2,600,000 5,842,206U.S. Dollars 29,974,164 29,098,743 23,247,670 21,491,511Japanese Yens - 1,169,900 - 1,169,900Total 35,867,987 41,441,066 25,847,670 28,503,617


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16.2 Long-term loans Consolidated The Company Notes 2005 2004 2005 2004 (In Thousand Baht) The Company 16.2.1 1. Thai Baht repayable in fourteen (14) semi-annual equal installments commencing on 30 September 16.2.1.1, 2004 to 31 March 2011 (interest at the average 16.2.1.4, Baht 6 months time deposit rate plus a margin of 16.2.1.5, 2.94%) 16.2.1.6 - 5,842,206 - 5,842,206 2. U.S. Dollars 151.9 million in 2004 repayable in fourteen (14) semi-annual equal installments 16.2.1.1, commencing on 30 September 2004 to 31 March 16.2.1.4, 2011 (interest at LIBOR plus a margin of between 16.2.1.5, 2.50% and 3.25%) 16.2.1.6 - 5,954,154 - 5,954,154 3 U.S. Dollars 396.3 million in 2004 repayable in twelve (12) semi-annual equal installments 16.2.1.3, commencing on 30 September 2004 to 31 March 16.2.1.4, 2010 (interest at LIBOR plus a margin of between 16.2.1.5, 1.75% and 2.75%) 16.2.1.6 - 15,537,357 - 15,537,357 4 Japanese Yen 3,088.4 million in 2004 repayable in twelve (12) semi-annual equal installments 16.2.1.3, commencing on 30 September 2004 to 31 March 16.2.1.4, 2010 (interest at TIBM plus a margin of between 16.2.1.5, 1.75% and 2.75%) 16.2.1.6 - 1,169,900 - 1,169,900 5. U.S. Dollars 65 million under U.S. Dollars 65 million and Baht 2,600 million Syndicated Loan Facility agreement repayable in six (6) semi-annual installments commencing In September 2008 (interest at LIBOR plus a margin of 1.18%) 16.2.1.6 2,676,349 - 2,676,349 - 6. Thai Baht under U.S. Dollars 65 million and Baht 2,600 million Syndicated Loan Facility agreement repayable in six (6) semi-annual installments commencing in September 2008 (interest at the average Baht 6-month time deposit rate plus a margin of 2.75%) 16.2.1.6 2,600,000 - 2,600,000 - 7. U.S. Dollars 150 million in 2005 under U.S. Dollars 200 million Revolving Credit Facility agreement, principal will be repayable in full at the fifth anniversary of the date of the agreement (interest at LIBOR plus a margin of 0.36%), prior to maturity date, it’s Company’s own discretion whether to make a drawdown or repayment within the availability period as well as decision to select the interest period of the amount drawdown under the relevant terms and conditions under the loan agreement 16.2.1.6 6,176,190 - 6,176,190 -


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Consolidated The Company Notes 2005 2004 2005 2004 (In Thousand Baht)

Subsidiary Companies:

Thaioil Power Co., Ltd. 16.2.2

Onshore loans - Tranche A 1,105,606 1,761,953 - - Independent Power (Thailand) Co., Ltd. 16.2.3 Onshore loans - Tranche A1 (U.S. Dollars 28.8 million in 2005 and U.S. Dollars 31.2 million in 2004) 1,185,828 1,223,118 - - - Tranche A2 736,931 798,342 - - - Tranche A3 673,716 729,859 - - - Tranche A5 266,809 289,043 - - - Tranche E 177,618 199,147 - - Offshore loans - Tranche B (U.S. Dollars 81.1million in 2005 and U.S. Dollars 101.3 million in 2004) 3,340,886 3,969,292 - - Thaioil Marine Co., Ltd. 16.2.4 Onshore loans - Loan from a local bank amounting to U.S. Dollars 0.09 million in 2004 repayable in 47 monthly installments of U.S. Dollars 40,000 each and the last installment of U.S. Dollars 32,500, commencing May 2002 (interest at LIBOR plus 2.5%) 16.2.4.1 - 3,496 - - - Loan from a local bank amounting to U.S. Dollars

1.86 million in 2004 repayable in 57 monthly equal installments of U.S. Dollars 35,800 each and the last installment of U.S. Dollars 35,200 commencing August 2004 (interest at LIBOR plus 2.25%) 16.2.4.2 - 72,955 - -

Thai Paraxylene Co., Ltd. 16.2.5 Onshore loans - Tranche A1 (U.S. Dollars 33.4 million in 2005 and

U.S. Dollars 39.6 million in 2004) 16.2.5.1

1,376,286

1,554,320

-

- - Tranche A2 16.2.5.2 333,145 395,167 - - Offshore loans - Tranche J (U.S. Dollars 20 million in 2005 and

2004) 16.2.5.3

823,492

784,050

-

- Total 21,472,856 40,284,359 11,452,539 28,503,617

Less: portion due within one year ( 1,615,852) (1,578,782) ( - )

-

Net 19,857,004 38,705,577 11,452,539 28,503,617


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16.2.1 The Company In April 2004, the Company refinanced, repurchased and exchanged long-term loans in Thai Baht, U.S. Dollars and Japanese Yen indebtedness under a Master Restructuring Agreement (MRA) as follows: 16.2.1.1 Refinanced Thai Baht loans amounting to Baht 13,503.2 million (under MRA) into seven-year

term loans of Baht 6,654.6 million (loan 1. above) and U.S. Dollars 173 million (loan 2. above), each maturing in 2011 under the Refinance Facility (Baht) and Refinance Facility (Onshore Dollar) Loan Agreements, respectively, dated 19 April 2004.

16.2.1.2 Purchased U.S. Dollars 213.3 million of U.S. Dollar-denominated MRA debt in relation to loan. In

this connection, the Company has a gain on this debt repurchase before maturity totaling Baht 314.9 million. This gain was presented as other income in the statement of income for the year ended 31 December 2004.

16.2.1.3 Exchanged the remaining U.S. Dollar loan amounting to U.S. Dollars 451.4 million (under MRA)

and Japanese Yen loan amounting to Japanese Yen 3,517.8 million (under MRA) for six-year term loans, each maturing in 2010 under the Base Facility (U.S. Dollar) (loan 3. above) and Base Facility (Yen) (loan 4. above) Loan Agreements, respectively, dated 19 April 2004.

Since 28 April 2004, the security and covenants over the loans have been changed from those relating to restructured debts to those relating to normal corporate finance loans. The remaining security over loans includes the conditional novation of the land lease agreement with the Ministry of Finance and the assignment of the all risks and loss of profit insurance policy. In accordance with the terms of the loan agreements, the Company is required to maintain certain financial ratios and shareholding structure. 16.2.1.4 On 29 June 2004, the Company prepaid some of the outstanding principals on the refinanced loans

as follows:

Facility Loan No. Currency In Million

Refinance Facility (Baht) maturing in 2011 1. Thai Baht 812 Refinance Facility (Onshore Dollar) maturing in 2011 2. U.S. Dollars 21 Base Facility (U.S. Dollar) maturing in 2010 3. U.S. Dollars 55 Base Facility (Yen) maturing in 2010 4. Yen 429


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16.2.1.5 On 7 March 2005, the Company prepaid some of the outstanding principals on the refinanced loans as follows:

Facility Loan No. Currency In MillionRefinance Facility (Baht) maturing in 2011 1. Thai Baht 801 Refinance Facility (Onshore Dollar) maturing in 2011 2. U.S. Dollars 21 Base Facility (U.S. Dollar) maturing in 2010 3. U.S. Dollars 54 Base Facility (Yen) maturing in 2010 4. Yen 423

16.2.1.6 On 10 June 2005, the Company repaid all of remaining principals and cancelled the existing loan

agreements together with their related security by entering into U.S. Dollars 65 million and Baht 2,600 million Syndicated Loan Facility agreement and U.S. Dollars 200 million Revolving Credit Facility agreement dated 3 June 2005 (loans 5, 6 and 7 above) and issued ten-year-term notes at pricing rate of 99.884 % of face value of U.S. Dollars 350 million, maturing on 9 June 2015 at the interest rate of 5.10% per annum payable semi-annually in arrears of each year, commencing on 9 December 2005. The loan agreement and the Offering Circular agreement for notes have certain covenants pertaining to maintenance of certain financial ratios in the financial statements and percentage of shares held by the major shareholder.

As at 31 December the outstanding balances of notes were as follows: Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Notes 14,411,110 - 14,411,110 -Less: Discount on notes ( 15,979) ( - ) ( 15,979) ( - )Net 14,395,131 - 14,395,131 - On 11 January 2006, the Company has repaid U.S. Dollars 100 million of loan principal under U.S. Dollars 200 million Revolving Credit Facility Agreement.


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16.2.2 Thaioil Power Co., Ltd. On 25 December 2003, Thaioil Power Co., Ltd., a local bank and a local financial institution entered into a new credit facilities agreement to obtain loan and credit facilities to repay its long-term loans and to use for general business purpose. In January 2004, the company drew down tranche A from such credit facilities to repay the former loans. As at 31 December 2005 and 2004, the details were as follows: Onshore loans Facilities Interest Tranche Currency (In Million) Purposes Years Rates (%) Repayment Terms

A Baht 1,971 Repay local long- term loan

1 - 2 3 - 9

4.00 6 month-fixed deposit rate plus 2.75

Semi-annual installments at varying amounts commencing 30 March 2004

B Baht 200 Short-term loan

business for general purposes

- 6 month-fixed deposit rate plus 3.25

-

C Baht 75 Guarantee for - 1.50 - cancellation before maturity

of the agreement In 2005, Thaioil Power.Co., Ltd., repaid the above loans before maturity amounting to Baht 448 million.


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16.2.3 Independent Power (Thailand) Co., Ltd. On 13 February 1997 and 21 March 1997, Independent Power (Thailand) Co., Ltd. entered into a Master Facilities Agreement and other related agreements with a group of banks and financial institutions to obtain loans and credit facilities to finance project costs and to use as working capital. As at 31 December 2005, the details were as follows: Onshore loans Facilities Interest Tranche Currency (In Million) Purposes Years Rates (%) Repayment Terms

A1 U.S. Dollars 40 Project cost 1-7 SIBOR plus Semi-annual installments margin of 1.375 at varying amounts 8-9 SIBOR plus commencing 21 March 2000 margin of 2.75 9-12 SIBOR plus margin of 1.625 13-17 MLR

A2 Baht 1,000 Project cost 1-5 11.75 Semi-annual installments 6-7 7.00 at varying amounts 8-9 MLR commencing 21 March 2000 9-12 MLR less 1.25 13-17 MLR less 0.75

A3 Baht 920 Project cost 1-4 MLR less 0.375 Semi-annual installments

5-8 MLR less 0.25 at varying amounts 9 MLR less 0.125 commencing 21 March 2000 9-12 MLR less 1.25 13-17 MLR less 0.75

A5 Baht 371.4 Project cost 1-4 MLR less 0.375 Semi-annual installments 5-8 MLR less 0.25 at varying amounts 9 MLR less 0.125 commencing 21 March 2000 9-12 MLR less 1.25 13-17 MLR less 0.75

D1 Baht 520 Working capital - MOR -

D2 Baht 60 Working capital - MOR -

D3 Baht 20 Guarantee of - 1.50 -

facilities

E Baht 308.6 New transmission 1-4 MLR less 0.375 Monthly installments facility 5-8 MLR less 0.25 at fixed amounts 9 MLR less 0.125 commencing 1 December 1999 9-12 MLR less 1.25 13-17 MLR less 0.75

F1 Baht 620 Debt service 1-7 MOR less 0.25 - shortfall of 8-17 MOR

Tranche A and/or - Tranche E


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Offshore loans Facilities Interest Tranche Currency (In Million) Purposes Years Rates (%) Repayment Terms

B U.S. Dollars 144 Project cost 1-3 LIBOR plus 0.75 Semi-annual installments 4-15 LIBOR plus 0.95 at varying amounts commencing 21 March 2000

F2 U.S. Dollars 32 Debt service 1-15 LIBOR plus 0.95 - shortfall of

Tranche B - MLR is the average minimum lending rate of 3 Thai banks. - MOR is the average minimum overdraft rate of 3 Thai banks (in the case of Tranche D1). - MOR is the average minimum overdraft rate of each lender (in the case of Tranche D2 and Tranche F1). 16.2.4 Thaioil Marine Co., Ltd. - Onshore loans 16.2.4.1 On 27 March 2002 and 7 November 2002, Thaioil Marine Co., Ltd. entered into loan agreements

with a local bank to obtain finance to acquire two chemical tankers. In May 2004, Thaioil Marine Co., Ltd. paid a part of loan principal totaling U.S. Dollars 2.4 million before the maturity of the agreement and during 2005, the remaining loan principal was repaid in full.

16.2.4.2 On 5 April 2004, Thaioil Marine Co., Ltd. entered into a loan agreement in the sum of U.S.

Dollars 2.04 million with a local bank to acquire a liquid chemical tanker. In September 2005, Thaioil Marine Co., Ltd. repaid the loan in full before the maturity of the agreement.

16.2.5 Thai Paraxylene Co., Ltd. On 13 September 2000, Thai Paraxylene Co., Ltd. entered into the Amendment Agreement relating to the Credit Facilities Agreement with two local financial institutions and the JGC Loan Agreement with a foreign company to obtain the following loans: Onshore loans 16.2.5.1 Tranche A1 a U.S. Dollar term loan facility up to the equivalent of U.S. Dollars 54 million and a

Baht term loan facility up to Baht 200 million from a local financial institution to finance the costs of constructing plant. The U.S. Dollar term loan bears interest at the rate of 3.25% per annum over LIBOR. These loans are repayable in 20 semi-annual installments at varying amounts commencing in September 2002.

16.2.5.2 Tranche A2 a loan facility up to Baht 585 million from a local bank to finance the costs of

constructing plant. The loan bears interest at the rate of 0.75% per annum over MLR and is repayable in 20 semi-annual installments at varying amounts commencing in September 2002.

Offshore loans 16.2.5.3 Tranche J a U.S. Dollar term loan facility up to the equivalent of U.S. Dollars 20 million from a

foreign company to finance the costs of constructing plant. The loans bear interest at the fixed rate of 8% per annum and are repayable in full within (a) 12 years from the date of the first utilization, or (b) the date following the day the Tranche A loans are repaid in full, whichever occurs later.


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16.3 Security of subsidiary companies’ loans - Consolidated As at 31 December 2005 and 2004, the loan facilities to Thaioil Power Co., Ltd., Independent Power (Thailand) Co., Ltd., Thaioil Marine Co., Ltd. and Thai Paraxylene Co., Ltd. were secured by the following assets of these subsidiary companies: 2005 2004 (In Thousand Baht) Current accounts, savings and fixed deposits at banks 2,767,038 1,582,000 Current investments in promissory notes 202,777 1,250,420 Power plant - carrying value 11,738,404 12,571,117 Paraxylene plant - carrying value 6,581,220 6,719,359 Liquid chemical tankers - carrying value - 175,825 17. Other non-current liabilities

As at 31 December 2005 and 2004, construction payable amounting to Baht 41.18 million and Baht 40.31 million, respectively was incurred from plant construction of Thai Paraxylene Co., Ltd. and will be paid in 2012 as stipulated in the construction agreement. As at 31 December 2005 and 2004, debts under Business Reorganization Plan, net amounting to Baht 34.47 million and Baht 93.42 million, respectively are the remaining debts incurred from debt restructuring under the Business Reorganization Plan dated 16 October 2003 of Thai Lube Base Public Company Limited, which debts are due from 3 years to 10 years while having interest rates as stipulated in this Plan.


(In Thousand Baht) Deposit and rental receive in advance 56,925 117,217 298,787 321,132 Pension Fund 33,697 194,850 33,697 194,850 Construction payable 41,175 40,312 - - Debts under Business Reorganization Plan, net of current portion shown under other current liabilities 34,469 93,420 - - Total 166,266 445,799 332,484 515,982


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18. Share capital

At the extraordinary shareholders’ meetings held on 25 June 2004 and 6 August 2004, the shareholders unanimously approved the conversion of Thai Oil Company Limited to be a public company. The Company registered this change on 9 August 2004 and changed its name to Thai Oil Public Company Limited from that date. The shareholders also approved the increase in registered share capital of the Company from Baht 18,965,278,730 (divided into 1,896,527,873 shares with a par value of Baht 10 each) to Baht 20,400,278,730 (divided into 2,040,027,873 shares with a par value of Baht 10 each) by issuing 40,000,000 new common shares to directors, employees of the Company, employees of Thaioil Marine Company Limited and in the case there are some remaining unsubscribed shares to the Provident Fund of the Employees of Thai Oil Public Company Limited Group (Registered) (“ESOP”) at the offering price of Baht 10 per share, as well as offering 90,000,000 new common shares to the public and 13,500,000 new common shares for the exercise of the over-allotment option by the over-allotment agent, totaling 103,500,000 new common shares. Subsequently on 22 September 2004, the Company has received money in the amount of Baht 400 million from new common shares sold to directors, employees of the Company, employees of Thaioil Marine Company Limited and the Provident Fund of the Employees of Thai Oil Public Company Limited Group (Registered) under ESOP. On 20 October 2004, the Company sold 90,000,000 new common shares and most of the existing shareholders sold all or part of their shares to the public through an Initial Public Offering (IPO) at the price of Baht 32 per share. Later, on 19 November 2004, 13,500,000 new common shares of the Company were exercised at the same price as IPO under the over-allotment option by the over-allotment agent. A directly attributable expense for IPO amounting to Baht 252 million is accounted for as a deduction from the premium on share capital received from this IPO. Proceeds derived from the sale of the Company’s new common shares are expected to partially fund various investments, including an increase in the capacity of its largest Crude Distillation Unit (CDU-3), the integration of Thai Lube Base Public Co., Ltd. and Thai Paraxylene Co., Ltd. into its operations, the expansion of Thai Paraxylene Co., Ltd. and for general corporate purposes.

Par 2005 2004

Value Number Baht Number Baht (In Baht) (In Thousand) Authorised At 1 January - Ordinary shares 10 2,040,028 20,400,279 1,896,528 18,965,279 - Creation of new shares 10 - - 143,500 1,435,000 At 31 December - Ordinary shares 10 2,040,028 20,400,279 2,040,028 20,400,279 Issued and fully paid At 1 January - Ordinary shares 10 2,040,028 20,400,279 1,896,528 18,965,279 - Issue of new shares 10 - - 143,500 1,435,000 At 31 December - Ordinary shares 10 2,040,028 20,400,279 2,040,028 20,400,279


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19. Reserves

Share premium The share premium account is set up under the provisions of Section 51 of the Public Companies Act B.E. 2535, which requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). The account is not available for dividend distribution.

Revaluation reserve The revaluation reserve includes the surpluses arising from the revaluations of land, refining plant and machinery and equipment. Legal reserve The legal reserve is set up under the provisions of Section 116 of the Public Companies Act B.E. 2535. Section 116 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

20. Other income Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Interest income 278,891 82,643 313,271 62,682 Land lease income 8,727 31,706 46,473 46,595 Income from service and supply to related parties 4,541 251,904 941,354 688,490 Insurance claims from insurers - 20,378 - - Gain from debt repurchase before maturity - 314,903 - 314,903 Negative goodwill amortisation 24,374 - - - Others 386,164 255,666 254,942 242,539 Total 702,697 957,200 1,556,040 1,355,209 21. Cost of sale of goods and rendering of services Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Crude oil and feedstock 188,576,845 128,453,927 200,654,177 127,608,541 Excise duty 19,187,838 23,235,644 19,187,838 23,235,644 Depreciation 5,811,206 5,242,909 4,447,585 4,522,878 Employee costs 1,243,775 1,069,780 1,038,181 956,687 Others 10,882,951 6,729,791 5,962,377 2,464,397 Total 225,702,615 164,732,051 231,290,158 158,788,147


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22. Selling and administrative expenses Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Advisory and legal fee 77,004 132,674 62,346 121,596 Employee cost 300,967 199,469 198,343 151,158 Depreciation 57,099 230,334 12,007 12,561 Others 529,322 496,754 482,796 373,137 Total 964,392 1,059,231 755,492 658,452 23. Pension fund The Company has a retirement gratuity fund plan to provide retirement and gratuity benefits to all of its employees. Benefits are payable upon retirement, disability, death or resignation. Provisions are computed on the benefit formula assuming all employees are terminated at the balance sheet date. The provision for retirement gratuity expense amounted to approximately Baht 117.3 million and Baht 97 million for each of the years ended 31 December 2005 and 2004, respectively. 24. Registered provident funds The Company and subsidiary companies established contributory provident funds for their employees. Membership to the funds is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 3% to 15% of their basic salaries and by the Company and subsidiary companies from 5% to 15% of the employees’ basic salaries. The provident funds were registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Manager. The Company’s and subsidiaries’ contributions to the funds total Baht 59.7 million and Baht 50.1 million for each of the years ended 31 December 2005 and 2004, respectively. 25. Interest expense and financial expenses


(In Thousand Baht) Interest expense - related parties 1,622 17,231 12,200 18,549 - financial institutions 2,039,259 1,880,985 1,307,493 1,259,981 Financial expenses 111,397 400,967 107,802 340,641 Total 2,152,278 2,299,183 1,427,495 1,619,171


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26. Deferred tax

The change in income tax for each of the years ended 31 December 2005 and 2004 is as follows:

Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Current tax for the year (3,965,459) (3,636,822) (3,936,434) (3,636,822) Add deferred income tax 558,972 669,977 555,019 657,808 Income tax (3,406,487) (2,966,845) (3,381,415) (2,979,014)

Deferred tax assets and liabilities determined after appropriate offsetting are included in the balance sheets as follows:

Consolidated The Company 2005 2004 2005 2004 (In Thousand Baht) Deferred tax assets 206,554 196,041 194,144 181,200 Deferred tax liabilities (2,825,449) (2,263,737) (2,772,780) (2,204,684) Net (2,618,895) (2,067,696) (2,578,636) (2,023,484) Movements in deferred tax assets and liabilities, prior to offsetting of balances, during the year are as follows:

Consolidated Balance Charged / (credited) to Balance Charged / (credited) to Balance as at as at as at 1 January Statement 31 December Statement 31 December 2004 of income Equity 2004 of income Equity 2005 (In Thousand Baht) Deferred tax liabilities Depreciation (1,679,630) 77,379 - (1,602,251) 59,898 - (1,542,353) Provision for hedging on foreign exchange and forward contracts ( 40,362) 4,920 - (35,442) 4,089 - ( 31,353) Amortisation of transmission facility transferred to EGAT ( 65,437) 6,384 - (59,053) 6,384 - ( 52,669) Equity loss (gain) on subsidiary and related companies ( 55,135) 55,135 - - - - - Surplus on revaluation of assets - 564,282 (1,131,273) (566,991) 478,088 (1,110,171) (1,199,074) Total (1,840,564) 708,100 (1,131,273) (2,263,737) 548,459 (1,110,171) (2,825,449) Deferred tax assets Pension fund 102,400 (43,945) - 58,455 13,906 - 72,361 Loss on impairment of assets 119,153 - - 119,153 - - 119,153 Capitalized interest charged as part of cost of land 9,056 5,785 - 14,841 ( 2,431) - 12,410 Others 3,555 37 - 3,592 ( 962) - 2,630 Total 234,164 (38,123) - 196,041 10,513 - 206,554 Net (1,606,400) 669,977 (1,131,273) (2,067,696) 558,972 (1,110,171) (2,618,895)


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The Company Balance Charged / (credited) to Balance Charged / (credited) to Balance as at as at as at 1 January Statement 31 December Statement 31 December 2004 of income Equity 2004 of income Equity 2005 (In Thousand Baht) Deferred tax liabilities Depreciation (1,679,630) 77,379 - (1,602,251) 59,898 - (1,542,353)Provision for hedging on foreign exchange and forward contracts ( 40,362) 4,920 - ( 35,442) 4,089 - ( 31,353)Equity loss (gain) on subsidiary and related companies ( 55,135) 55,135 - - - - - Surplus on revaluation of assets - 564,282 (1,131,273) ( 566,991) 478,088 (1,110,171) (1,199,074)Total (1,775,127) 701,716 (1,131,273) (2,204,684) 542,075 (1,110,171) (2,772,780) Deferred tax assets Pension fund 102,400 (43,945) - 58,455 13,906 - 72,361 Loss on impairment of assets 119,153 - - 119,153 - - 119,153 Others 3,555 37 - 3,592 ( 962) - 2,630 Total 225,108 (43,908) - 181,200 12,944 - 194,144 Net (1,550,019) 657,808 (1,131,273) (2,023,484) 555,019 (1,110,171) (2,578,636)

As at 31 December 2005 and 2004, the remaining balance of deferred tax liability relating to revaluation surplus, which has not been recorded in the financial statements, amounted to Baht 3,309 million and Baht 4,525 million, respectively. 27. Basic earnings per share The calculation of basic earnings per share at 31 December 2005 was based on the profit attributable to ordinary shareholders of Baht 18,753 million (2004: Baht 15,073 million) and the weighted average number of shares outstanding during the year ended 31 December 2005 of 2,040 million shares (2004: 1,927 million shares) calculated as follows:

28. Dividends At the Company’s ordinary shareholders’ meeting held on 28 April 2005, the shareholders unanimously approved the distribution of cash dividends for the year ended 31 December 2004 at Baht 1.80 per share, amounting to Baht 3,672 million and the appropriation of Baht 345 million or 5% of net profit after deduction of deficit as legal reserve.


(In thousand shares) Issued ordinary shares at 1 January 2,040,028 1,896,528 2,040,028 1,896,528Effect of shares issued on 22 September 2004 - 40,000 - 40,000Effect of shares issued on 20 October 2004 - 90,000 - 90,000Effect of shares issued on 19 November 2004 - 13,500 - 13,500Total 2,040,028 2,040,028 2,040,028 2,040,028Weighted average number of ordinary shares at 31 December 2,040,028 1,927,103 2,040,028 1,927,103


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29. Agreements a) Throughput Agreement Pursuant to the shareholders agreement entered into among the shareholders of Thai Petroleum Pipeline Company Limited (THAPPLINE), the Company, which currently holds an 9.43% shareholding of THAPPLINE, entered into a “Throughput Agreement” with THAPPLINE. Under the terms and conditions of the agreement, the Company commits to make a tariff prepayment not exceeding an aggregate of Baht 250 million to THAPPLINE at any time as requested by THAPPLINE if the following events occur: (i) THAPPLINE has a cost overrun during pre-completion period; and (ii) THAPPLINE has a cash shortfall during the post-completion period. The tariff prepayment may be redeemed by the Company when the conditions stipulated in the agreement are met. The Company paid such a payment amounting to Baht 250 million and subsequently made a full provision for this payment. However in 2005 the Company received this advance payment back with interest totaling Baht 416.3 million. b) Technical Services Agreement The Company entered into Technical Service Agreement with Shell Global Solutions (Thailand) Limited whereby SGST gives an advice and other services to support the Company’s refining operations. This agreement is for a minimum period of 3 years commencing on 1 January 2005 and shall be terminated if any party notifies in writing the other party any intention of termination at least twelve months before the termination of the agreements. In consideration thereof, the Company pays a fixed annual fee to SGST plus additional fees based on agreement to Shell Global Solutions (Thailand) Limited.

c) Construction/Supply Contract As at 31 December 2005 and 2004, the Company and subsidiary companies had various contracts with certain companies for additional capital projects with an outstanding contract price equivalent to approximately Baht 8,999 million and Baht 141.2 million, respectively. d) Gas Supply Agreement On 1 February 2006, 17 March 1997 and 1 March 1998, the Company and subsidiary companies entered into 8 and 25 years, respectively for Gas Supply Agreement with PTT Public Company Limited (PTT) whereby PTT will supply natural gas to the Company and subsidiary companies in the agreed quantities and at the agreed price. e) Power Purchase Agreements Two subsidiary companies entered into 25 years Power Purchase Agreements with the Electricity Generating Authority of Thailand (EGAT) whereby these companies will supply electric power to EGAT in the agreed quantities and at the agreed price. These agreements will expire on 1 April 2023 and 15 August 2025. f) Product Offtake and Crude Oil Supply Agreement On 3 April 2000, the Company entered into a Product Offtake and Crude Oil Supply Agreement with PTT Public Company Limited (PTT) whereby (a) the Company will sell and PTT will purchase refined petroleum products produced by the refinery for 49.99% of 220,000 barrels of products per day and (b) PTT will supply and the Company will purchase crude oil and/or feedstock for the refinery required to produce 49.99% of 220,000 barrels of products per stream day. The credit term for crude oil and/or feedstock shall be mutually agreed. On 13 September 2004, the Company and PTT agreed to amend the agreement to increase the required volume to 270,000 barrels per day after the completion date of the expansion of Crude Distillation Unit 3 (CDU-3) and ready for start up.


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g) Claims Settlement Package Agreement On 27 September 2000, the Company entered into a Claims Settlement Package Agreement with a subsidiary company (Thai Lube Base Public Co., Ltd.) to settle a dispute concerning alleged damage to Thai Lube Base Public Co., Ltd. suffered as a result of the actions of the Company’s plan administrator. The Claims Settlement Package Agreement has the following significant conditions: 1) The Company will pay the subsidiary company a total of U.S. Dollars 6.9 million over a ten year

period in installments of varying amounts up to 31 March 2010. This amount represents compensation due and owing for 1999 under the Supplemental Supply and Offtake Agreement dated 16 February 1995 between the Company and the subsidiary company. The Supplemental Supply and Offtake Agreement was cancelled by the plan administrator of the Company.

2) The Company will immediately pay the subsidiary company up to Baht 30.9 million relating to a

disputed payment for by-product. 3) After the completion of the debt restructuring of the subsidiary company, the Company will enter into a

ten-year agreement with the subsidiary company whereby the latter will supply by-product to the Company in the agreed quantities and at the agreed price with a premium of U.S. Dollars 4 per ton on the supplied volume.

4) The Company will enter into a ten-year feedstock supply agreement with the subsidiary company

whereby the latter will purchase feedstock from the Company in the agreed volume. 5) The Company will receive 13% of the shares in the subsidiary company, up front at par value, which is

the same subscription price as for other shareholders, for the amount equivalent to the present value (at a discount rate of 10%) of the consideration paid or contribution by the Company when the conditions as discussed in Items 1), 2) and 3) above are met.

After the finalization of the Business Reorganization Plan of Thai Lube Public Co., Ltd. dated 16 December 2003, the Company complied with items 1) and 2) and received 36,790,463 shares on 7 January 2004. On 10 May 2005, the Company paid the compensation under item 3) as discussed in Note 4. The obligation under item 4) has been terminated. h) Long-Term Leases In 1992, the Company entered into a land lease agreement with the Treasury Department to lease the land where the refinery plant and staff housing compound are located for a period of 30 years expiring on 10 September 2022. The annual rentals for the first five years were set at Baht 111 million and are subject to an escalation adjustment at the rate of 15% every five years. The Company paid a land lease arrangement fee of Baht 1,220 million, which was recorded as “Deferred Land Lease Arrangement Fee” shown under “Other Non-Current Assets”. This is being amortised over the period of the lease. The Company obtained a bank guarantee from the Treasury Department totaling Baht 131 million as collateral for the annual rental.


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i) Agreement for Crude Oil Processing On 20 October 1999, the Company entered into an agreement for crude oil processing with PTT Public Company Limited (PTT) whereby PTT will supply crude oil to the Company and the Company will provide a processing service. In this regard, the Company will either receive payments from or make payments to PTT depending on whether the processing fee for the different amount of products lifted by PTT is higher or lower than the total value of Relevant Crude Intake in the same month, taking into account other expenses plus the cost of funds, if any, incurred by either party. There was no indication of expiry date specified in this agreement. j) Feedstock Throughput Agreement On 4 April 2001, the Company entered into a Throughput Agreement with Esso (Thailand) Public Company Limited (Esso) to jointly participate in the construction of new tie-in facilities which are required for the receipt and carriage of feedstock from the Single Buoy Mooring into the Esso feedstock tanks. The agreement shall be valid for a period of 5 years commencing upon the date on which the tie-in facilities are ready for start-up. Esso shall pay the Company a non-refundable feedstock throughput fee as stipulated in the agreement. The maximum throughput shall not exceed 40 million barrels per year. k) Sale and Purchase Agreements On 26 December 2003, the Company entered into a sale and purchase agreement with The Shell Company of Thailand Limited (Shell) to sell refined petroleum products to Shell whereby Shell shall lift and purchase from the Company at domestic market price during the agreement term at the agreement volume, until terminated by not less than six months’ prior written notice given by any one party to the other. On 30 June 2005, the Company entered into a sale and purchase agreement with The Caltex Oil (Thailand) Limited (Caltex) to sell refined petroleum products to Caltex whereby Caltex shall lift and purchase from the Company at domestic market price during the agreement term at the agreement volume, until terminated by not less than six months’ prior written notice given by any one party to the other. l) Working Capital Facility Agreements The Company entered into the working capital facility Agreements with eight commercial banks registered in Thailand and foreign banks branch. These loan are clean loan and are comprised of committed and uncommitted lines as specified in such agreements.

m) Long Residue Cracking and Fuel Oil Exchange Agreement On 1 June 2002, the Company entered into a Long Residue Cracking and Fuel Oil Exchange Agreement with The Bangchak Petroleum Public Company Limited (BCP) to exchange BCP’s Long Residue for Cracking in the Company’s process and receive Fuel Oil left from the process for selling in BCP’s market. The agreement shall continue indefinitely until terminated by not less than ninety days’ prior written notice given by any one party to the other. Payments shall be made on a net settlement basis as stipulated in the agreement.


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n) Oil transportation agreements On 15 June 2005 and 15 July 2005, a subsidiary company entered into two agreements with Esso (Thailand) Public Company Limited to transport oil products. The term of each agreement was one year commencing from the agreement date and is renewable annually if counter notifies in writing the company any intention of expansion at least one month or three months before the termination of the agreement as specified in each agreement. On 28 July 2005, a subsidiary company entered into an agreement with PTT Public Company Limited to transport oil products. The term of the agreement was one year commencing from the agreement date and is renewable if counterparty notifies in writing the company any intention of expansion at least three months before the termination of the agreement. 30. Promotional privileges The subsidiary companies have been granted certain privileges by the Board of Investment Act, B.E. 2520 which include, among other things, the following: a) Three subsidiary companies have been exempted from payment of import duty on machinery as approved by the Board. b) Four subsidiary companies have been exempted from payment of corporate income tax for promoted operations for a period of 8 years from the date income is first derived from such operations. As a promoted companies, the subsidiary companies must comply with certain conditions and restrictions provided for in the promotional certificates. 31. Contingent liabilities and commitments a) As at 31 December 2005, the Company and subsidiary companies were contingently liable to certain

banks for letters of guarantee issued to the Treasury Department and others totaling Baht 174 million and Baht 135 million, respectively.

b) As at 31 December 2005, the Company had outstanding contract commitments to purchase crude oil

with several foreign suppliers totaling approximately U.S. Dollars 578 million. c) As at 31 December 2005 the Company had commitments under interest rate knockout cap agreements

with 3 foreign banks to hedge interest rate risk in respect of its U.S. Dollars 450 million long-term loans. These loans, which originally had floating interest rates of LIBOR plus margin, are capped under the agreements at maximum interest rates of 6.0% and 6.5% per annum with a knockout rate of 7.5% per annum. Under the terms of the agreements, the Company is entitled to be paid by its hedging counter-parties the excess of LIBOR and the maximum interest rate for the each determination interest period for periods of 7 to 10 years.

d) A subsidiary company had various hedge agreements with two foreign banks to reduce the risk of

movement in interest rates covering U.S. Dollar loans obtained for the construction of plant, amounting to U.S. Dollars 84.2 million. For the duration of the agreement, the subsidiary company has commitments to receiving payments from or making payment to the other party whenever the interest rates vary from the agreed rates based on the terms and conditions stipulated in the agreements. However, the subsidiary still has the liable commitments with the lender if the counterparty is unable to comply with terms and conditions of such agreements.


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e) During 2002 and 2001, the Customs Department and Excise Department sent letters to a subsidiary company to claim payment of excise tax including penalty and surcharge for certain shipments of imported reduced crude oil totaling Baht 253.7 million. The subsidiary company’s management sent a letter to the Appeal Committee of the Excise Department to appeal this decision. On 18 April 2003, the Appeal Committee of the Excise Department took a decision to dismiss the subsidiary company’s appeals and ordered the subsidiary company to pay a penalty. On 22 May 2003, the subsidiary company filed a petition against the Excise Department, the Customs Department and the Revenue Department (the Defendants) to the Central Revenue Court to reclaim excise tax which had been charged and to deny the excise tax assessed by the Excise Department. On 15 July 2004, the Central Tax Court ruled in favor of the subsidiary company and ordered the Defendants to return the tax charged plus interest and bank guarantee and to release machinery belonging to the subsidiary company which was being held in encumbrance. The Defendants requested and were granted permission from the Court to extend the appeal period to 15 September 2004. On 14 September 2004, the Defendants sent an application to the Supreme Court to appeal the Central Tax Court’s decision and to suspend the execution of that decision. On 19 October 2004, the subsidiary company’s management sent a letter to the Supreme Court to object to the appeal and to request for suspended execution of the decision to be reversed. In addition, on 25 August 2005, the Excise Department was ordered to release such machinery and bank guarantee. However, as at 31 December 2005, this matter was in the process of consideration by the Supreme Court.

32. Segmented financial information - consolidated Segment information is presented in respect of the Group’s business. The primary format, business segments, is based on the Group’s management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and interest expenses, and corporate assets and expenses.

Business segments The Group comprises the following main business segments:

Segment 1 Oil refining

Segment 2 Lube base oil refining

Segment 3 Petrochemical

Segment 4 Power generation

Segment 5 Oil and chemical products transportation


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The business segmented financial information of the Group for each of the years ended 31 December 2005 and 2004 is as follows:

2005 (In Million Baht) Oil and

Chemical

Oil Lube Base * Petro-* Power Products Refining Oil refining Chemical Generation Transportation Elimination Total

Revenue from sale of goods and rendering of services 246,213 14,206 32,127 11,149 691 (55,275) 249,111 Cost of sale of goods and rendering of services (231,290) (12,739) (28,221) ( 9,157) ( 607) 56,311 (225,703)Gross profit 14,923 1,467 3,906 1,992 84 1,036 23,408 Gain (loss) on foreign exchange ( 734) 6 ( 92) ( 220) 7 - ( 1,033) Gain (loss) from disposal of fixed assets

( 305)

154

134

-

55

152

190

Reversal of allowance for impairment of assets

-

2,894

-

-

-

-

2,894

Other income 1,556 343 110 44 6 ( 1,356) 703 Selling and administrative expenses ( 756) ( 161) ( 158) ( 125) ( 58) 294 ( 964)Loss from impairment of investment, net ( 279) - - - - - ( 279)Loss from insurance claims - - - ( 232) - - ( 232)Interest and financial expense ( 1,427) ( 57) ( 230) ( 519) ( 10) 91 ( 2,152)Net profit of minority interest - - - ( 194) - ( 181) ( 375)Income tax expense ( 3,382) - - ( 25) - - ( 3,407)Net profit 9,596 4,646 3,670 721 84 36 18,753 Property, plant and equipment - net 46,836 4,086 8,004 12,394 431 (450) 71,301 Other assets 63,287 4,570 5,229 7,495 203 (27,916) 52,868 Total assets 110,123 8,656 13,233 19,889 634 (28,366) 124,169

* As discussed in Note 11 Thai Paraxylene Co., Ltd. purchased a Mixed-Xylenes Production Unit and Platformer 2 Unit with the attached equipment from Thai Oil Public Company Limited. Since April 2005, the Company has started to run MX unit, caused of the increase in by products sold to Thai Oil Public Company Limited.


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2004 (In Million Baht)

Oil

Lube Base *

Petro- *

Power Oil and Chemical

Products

Refining Oil refining Chemical Generation Transportation Elimination Total Revenue from sale of goods and rendering of services 176,993 1,792 2,219 7,281 906 ( 4,390) 184,801 Cost of sale of goods and rendering of services (158,788) (1,498) (2,188) (6,300) ( 879) 4,921 (164,732) Gross profit 18,205 294 31 981 27 531 20,069 Gain (loss) on foreign exchange 337 ( 12) 144 75 ( 1) - 543 Other income 1,355 85 5 83 4 ( 575) 957 Selling and administrative expenses ( 658) ( 31) ( 25) ( 295) ( 50) - ( 1,059) Loss from disposal of fixed assets - - - ( 59) ( 74) ( 15) ( 148) Interest and financial expense ( 1,619) ( 5) ( 40) ( 644) ( 18) 27 ( 2,299) Net profit of minority interest - - - 133 - ( 156) ( 23) Income tax expense ( 2,979) - - 12 - - ( 2,967) Net profit (loss) 14,641 331 115 286 ( 112) ( 188) 15,073 Property, plant and equipment, net 49,865 1,570 6,720 14,505 624 ( 759) 72,525 Other assets 45,750 2,033 1,500 4,928 229 (11,538) 42,902 Total assets 95,615 3,603 8,220 19,433 853 (12,297) 115,427 * Financial information of Thai Lube Base Public Company Limited and Thai Paraxylene Co., Ltd, which is presented in the above segmented financial information of the Company and subsidiary companies, is the result of their operations from 21 October 2004 to 31 December 2004. Property, plant and equipment of each segment represents the segmented operating assets, while other assets principally represent cash and deposits at financial institutions, current investments, trade accounts receivable, other receivables from subsidiary and related companies, inventories, receivable from Oil Fuel Fund, other current assets, loans to saving co-operative of employees, long-term receivables from subsidiary and related companies, investments in shares, intangible assets, negative goodwill, net, deferred tax assets and other non-current assets. 33. Insurance policy The Group has an All Risks and Loss of Profit Insurance Policy (ALOP) from a syndicate of insurers and reinsurers for a total insured value of approximately U.S. Dollars 4,694 million. Such ALOP is renewed on an annual basis. Certain subsidiary companies have assigned their rights to insurance claim in respect of the ALOP to the lenders under the loan agreements.


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34. Disclosures of financial assets and financial liabilities Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalents, current investments, trade accounts receivable, other receivables, long-term receivable, investment in shares, bank overdrafts and short-term loans from financial institutions, trade accounts payable, other payables, long-term payable and long-term debts. The accounting policies on recognition and measurement of these items are disclosed in the relative accounting policies in Note 3. 34.1 Liquidity risk Liquidity risk arises from the possibility that customers may not be able to settle obligations to the Group within the normal terms of trade. To manage this risk, the Company requires all parties other than its subsidiaries to provide letters of credit, bank guarantees, bank guaranteed instruments or pledge of oil deposits kept at the Company’s storage tanks as collateral, and periodically assesses the financial viability of customers. 34.2 Foreign currency risk The Group has long-term debts in foreign currencies, giving rise to significant foreign exchange translation exposure from changes in foreign exchange rates. The Company’s major revenue is US dollar linked while a significant portion of expenses is also U.S. dollar linked or in U.S. dollars. This acts as a natural hedge against long-term debt exposure to foreign currencies. The Group entered into short-term currency hedging contracts for short term foreign currency exposures to manage the timing difference in the receipt and expenditure of foreign currency linked items when appropriate. As at 31 December 2005 and 2004, the foreign currency assets and liabilities are as follows: Foreign Currency Amount (In Million) Consolidated The Company 2005 2004 2005 2004 Assets - U.S. Dollars 96 62 72 48 Liabilities - U.S. Dollars 486 769 315 572- Japanese Yens - 3,088 - 3,088 34.3 Credit risk Credit risk refers to the risk that a counterparty will default in its contractual obligations resulting in a financial loss to the Group. The Group has no significant credit risk with any single counterparty or group of counterparties since the Group maintains business with large customers in petroleum and power industries and requires full first class collateral for the rest. 34.4 Interest rate risk Interest rate risk arises from the fluctuation in money market rates, which may have a negative effect on the current and future operations of the Group. Hence, the Group has hedging agreements with various investment-grade financial institutions to protect against the risk of rising interest rates.


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34.5 Fair value of financial assets and financial liabilities Fair value is defined as the amount at which the financial instrument 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 by Group to estimate the fair value of each class of financial instrument. Cash and cash equivalents and accounts receivable - the carrying values approximate their fair values due to the relatively short-term maturity of these financial instruments. Current investments held to maturity in the normal course of business - the redemption amount approximates its fair value. Investments in shares of subsidiary companies, for which there is no quoted market price - a reasonable estimate of fair value has been calculated based on the underlying net asset base of these investments. The fair values approximate their carrying values. Investments in shares of related companies, for which there is no quoted market price - fair value cannot be properly calculated. Bank overdrafts and short-term loans from financial institutions and accounts payable - the carrying amounts of these financial liabilities approximate their fair values due to the relatively short-term maturity of these financial instruments. Long-term receivables from and loans to related parties, long-term payable and long-term debts carrying a floating rate, which is considered to be market rate - the carrying amounts approximate their fair values. Notes at face value of U.S. Dollars 350 million will be redeemed in full on maturity, resulting in no fair value. Long-term loans with fixed rate of interest - the fair value is estimated by using the discounted cash flow analysis based on the average interest rates currently being offered for loans with similar terms to borrowers of similar credit quality are presented as follow: Consolidated (In Million Baht) 2005 2004 Carrying Fair Carrying Fair Amount Value Amount Value Long-term loans - at fixed interest rate 823 823 784 784


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35. Insurance Claims During 2004, one of the two gas turbines, CT2, of a subsidiary company (Independent Power (Thailand) Co., Ltd.) exploded during normal operation of the generator. The subsidiary company has purchased a new combustion gas turbine amounting to U.S. Dollars 23.5 million to replace its damaged one. The subsidiary company has used insurance proceeds and available cash to pay for the new combustion gas turbine. During the three-month period ended 31 March 2005, the subsidiary company successfully settled the dispute with its insurers and received the claim amount of U.S. Dollars 23.5 million (approximately Baht 899.39 million), comprising U.S. Dollars 13 million (approximately Baht 497.56 million) for business interruption and U.S. Dollars 10.5 million (approximately Baht 401.84 million) for property damage. The subsidiary company wrote-off the damaged turbine and recorded a loss from insurance claims totaling Baht 232 million.

36. Reclassification of accounts Certain accounts in the 2004 financial statements and consolidated financial statements were reclassified to conform with the 2005 financial statement and consolidated financial statement presentation. 37. Others 37.1 On 19 January 2006, one of the two gas turbines, CT1, of a subsidiary company was interrupted as a

result of an electric short circuit of a transformer. The subsidiary company expects to take 240 days for the maintenance process. The management of the subsidiary company has been in the process of determining loss resulting from the incident and amount to be claimed from the insurance company.

37.2 On 27 January 2006, a subsidiary company repaid loan of U.S. Dollars 29.6 million to foreign lender

and is negotiating to revise the condition under the loan agreement with other lenders.

Documents

Financial statements and Audit report of Certified Public