Capital Markets’ Role in Thailand Energy Sector

July 2014

2

Global Privatization – Rationales and Lessons Learned

Global Evidences – Emerging Economies Privatization

There are a considerable number of privatizations remain in the pipeline

“If privatization is an evil, why governments in so many countries have done and are still working on privatizations?”

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

3 4 13 24 26 24 22 22 25 67 50 42 39 16 16 20 34 53 105 133 38

28111

341497 519

794

1,108993 1,010

757

1,796

385

188 164 140 171 225 288 249 236 197

Sales proceeds in US$ billion Number of transactions

A database of privatization records 10,197 transactions in 139 developing countries between 1988-2008, yielding US$ 773.3 billion revenues

Most profoundly, during the 1990s, a variety of rapid privatization techniques were adopted by the countries of Eastern Europe and the former Soviet Union, transforming their economies after the fall of communism

The transition of Chinese economy from communist to market-based has shown remarkable result. China contributed 6.4% of the total sales proceeds from 1988 – 1999 but contributed more 37.7% from 2000 - 2008 -------------------------------

Source: WorldBank Privatization Data 1988 - 2008

3

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Cabinet Approval on Management Policy for SOEs and Development of PTT

The National

Economic and

Social

Development

Plan: The Fifth

Plan (1982-1986)

Privatization Activities in Thailand

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

2 August 1989IPO Size: THB 6,000 mmSET Market Cap: THB 388 bn

19 July 1991IPO Size: THB 5,700 mmSET Market Cap: THB 707 bn

Cabinet Approval on preparation guideline and privatization process

1

2

10 June 1993IPO Size: THB 1,318 mmSET Market Cap: THB 1,507 bn

16 January 1995IPO Size: THB 4,488 mmSET Market Cap: -THB 3,066 bn

27 July 1996IPO Size: n/aSET Market Cap: THB 3,409 bn

6 December 2001IPO Size: THB 32,200 mmSET Market Cap: THB 1,607 bn

2 November 2000IPO Size THB 7,540 mmSET Market Cap: THB 1,336 bn

11 March 2004IPO Size: THB 17,328 mmSET Market Cap: THB 4,514 bn

17 November 2004IPO Size: THB 3,058 mmSET Market Cap: THB 4,327 bn

--------------------------Source: SET, Phatra Securities Estimates

SET INDEX

4

Privatization of PTT

200

250

300

350

400

450

1-A

ug-0

1

8-A

ug-0

1

15-A

ug-0

1

22-A

ug-0

1

29-A

ug-0

1

5-S

ep-0

1

12-S

ep-0

1

19-S

ep-0

1

26-S

ep-0

1

3-O

ct-0

1

10-O

ct-0

1

17-O

ct-0

1

24-O

ct-0

1

31-O

ct-0

1

7-N

ov-0

1

14-N

ov-0

1

21-N

ov-0

1

28-N

ov-0

1

5-D

ec-0

1

12-D

ec-0

1

19-D

ec-0

1

26-D

ec-0

1

2-Ja

n-02

9-Ja

n-02

16-J

an-0

2

23-J

an-0

2

30-J

an-0

2

6-F

eb-0

2

13-F

eb-0

2

20-F

eb-0

2

27-F

eb-0

2

6-M

ar-0

2

13-M

ar-0

2

20-M

ar-0

2

27-M

ar-0

2

30

33

36

39

42

PTT (RHS)

SET (LHS)

Listing Date:6 December 2001

Pre-Deal Marketing:15 – 29 October 2001

Decision on launching and determine price:26 October 2001

IPO Filing Became Public:8 October - 7 November 2001

Management Road Show:29 October - 16 November 2001

Share Subscription Period:12 - 16 November 2001

Decision on Pre-Deal Marketing:8 October 2001

9/11

Event

PTT IPO Price

--------------------------Source: SET, Phatra Securities Estimates

THB Per Share

5

PTT’s Offering Structure

Privatization Process Coordinator

Domestic Bookrunners

Total Size THB 32,200 mm(1)

IPO Shares 920 mm sharesIPO Price THB 35

International Bookrunners

9.99% 18.37% 35.88% 35.76%

Selling Agents

Domestic International

Thai Institutional Investors

Syndicate Retails(2) General PublicInternational Institutional Investors

-------------------------------------(1) Includes overallotment shares(2) With +20 securities firms as underwriters

6

PTT’s Price Performance

PTT’s Price Performance is In-line With Comparable

-------------------------(1)Simple Average of Comparable companies comprises CNOOC, Sinopec, and PetroChina(2)Comparable prices are rebased to PTT’s IPO price at THB 35

SET INDEX

De

c-0

1F

eb

-02

Ma

y-0

2A

ug

-02

Oct

-02

Jan

-03

Ap

r-0

3Ju

n-0

3S

ep

-03

No

v-0

3F

eb

-04

Ma

y-0

4Ju

l-0

4O

ct-0

4Ja

n-0

5M

ar-

05

Jun

-05

Au

g-0

5N

ov-

05

Fe

b-0

6A

pr-

06

Jul-

06

Oct

-06

De

c-0

6M

ar-

07

Ma

y-0

7A

ug

-07

No

v-0

7Ja

n-0

8A

pr-

08

Jul-

08

Se

p-0

8D

ec-

08

Ma

r-0

9M

ay-

09

Au

g-0

9O

ct-0

9Ja

n-1

0A

pr-

10

Jun

-10

Se

p-1

0D

ec-

10

Fe

b-1

1M

ay-

11

Jul-

11

Oct

-11

Jan

-12

Ma

r-1

2Ju

n-1

2S

ep

-12

No

v-1

2F

eb

-13

Ap

r-1

3Ju

l-1

3O

ct-1

3D

ec-

13

Ma

r-1

4Ju

l-1

40

2

4

6

8

10

12

PTT

Comps

7

Historical Spreads and Oil & Gas Prices

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q2014

Singapore Hydrocracking Margin(1)

2.19 1.61 4.04 7.54 7.00 5.45 7.65 6.14 3.64 4.59 8.26 7.49 6.19 5.98

Crude Oil – Arab Gulf Dubai(2) 18.28 26.24 27.9 33.11 53.19 56.71 89.06 37.02 78.29 88.54 104.84 106.67 107.89 104.63

Naphtha Singapore(3) 18.55 31.05 34.95 40.55 54.65 59.75 94.65 29.25 79.55 95.65 99.5 103.2 107.36 102.42

(US$/bbl)

-------------------------------(1) Thai oil Analyst Presentation for 2001 – 2005 and Thomson Reuter for 2006 – 2014 (2) Bloomberg(3) Bloomberg

8

PTT Group Use of Proceeds Raised from PublicProceeds from Public Shareholders

PTT IPO

PTTEP IPO

PTTEP PO'94

PTTEP PO'98

PTTEP PO'12

TOP IRPC BCP Total Proceeds

28.0 1.3

6.54.8

32.0

14.6

9.2

16.2 112.6THB (bn)

Total PTTEP: 40.6

------------------------Source: SETSmart and Company Prospectus

9

PTT Group Use of Proceeds Raised from Public

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

50

100

150

11 15 2141

92108

135151 158

129 132143

162

Capital Expenditure of THB 1.3 trn were Invested(1)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

50

100

150

7 10 15 23 32 4355 39 44 46 52 50 52

PTT PTTEP TOP PTTCH PTTAR PTTGC IRPC BCP

Paid More Than THB 469.7 bn of Tax Expenses(1)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0.0

50.0

100.0

150.0

2 10 11 1527

6250

64

3646

59 5970

Total Dividend of THB 510.3 bn was Paid to Public Shareholders(1)

THB bn

THB bn

THB bn

------------------------(1) Excludes RRC, ATC, TOC and NPC due to limited information (2) SETSmart and Company Prospectus

10

Investment Value and Return of Refinery

Customary Refinery Assumptions

Plant capacity 150,000 bbl/d

Investment cost per bbl USD 12,500

Total project cost (USD) USD 1,875 mm

USD / THB 32.0 per 1 USD

Total project cost (THB) THB 60 bn

Project life 25 years

Cash cost USD 1.3/bbl

Depreciation policy 4.0% per annum

Market IRR for refinery globally:

12 – 13% To achieve 12 – 13 % IRR under the assumptions on the left

Implied IRR for refinery company

GRM USD / bbl Implied IRR

USD 4 / bbl 4.0%

USD 5 / bbl 8.6%

USD 6 / bbl 12.8%

USD 7 / bbl 17.0%

If you were to build a newrefinery plant…

GRM of USD 6 / bbl is needed to maintain international market IRR of 12.8%

11

Market Replacement Cost of Refinery The Case of BCP

Market Cap Total net debt BCP EV Non refining EV Implied Refining EV

39.9

18.5 58.5 21.5

36.9

THB (bn)

(1)

------------------------Based on BCP’s closing price of THB 29.0 per share (1) Total net debt excludes net debt from solar farm businesses

BCP CDU Capacity: 120,000 bbl

Implied EV / CDU

(Market Replacement Cost)

USD: 9,610 /bbl/DAssume USD/THB: 1/32.0

12

Capital Required to Nationalize PTT Group of Companies

Nationalizing PTT Group of companies requires at least THB 802.5 bn

This calculation does not include the value of non-listed subsidiaries such as, SPRC and GPSC

____________________Source: SETSmart

Total Buyback

312,615.7

222,544.1

52,859.6

154,399.735,244.1

24,860.3 802,523.5

THB (bn)

Public Shareholding Percentage

PTT 34.0%

PTTEP 34.7%

PTTGC 50.1%

IRPC 52.0%

BCP 62.8%

SPRC 36.0%

GPSC 30.1%

Tota

l Ca

pita

l Nee

de

d U

po

n P

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tization