Report No. 574-TH A Study of Public Finances'. s : in Thailand (In Four Volumes) |__._=_ Volume IlI: Annex D-State Enterprises October 31, 1974 East Asia and Pacific Department Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group it may not be published, quoted or cited without Bank Group authorization The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS Currency Unit - Baht US $1 .00 B20.00 $1.00 Us $0.05 $ 1.00 million US $50,000 , 1.00 billion US $50 million Note: The Baht was maintained at a parity of $ 20.8 = US$1.00 until July 1973 when it was revalued to $ 20.0 = US$1.00. An average exchange rate of $ 20.4 = US$1.00 has been used for 1973 in this report. FCRWORD This report is based on the finding of a Public Finance Study Mission that visited Thailand from January 10 to February 8, 19?4. The Mission consisted of Oktay Yenal (Chief), Kazuko Artus (Fiscal Economist), Karl Stichenwirth (Public Enterprises), Kenneth Hubbell (Local Finance and Regional Development), James Theberge (Industrial Incentives), and was assisted by Lawrence Hinkle (Country Economist) and Bernard Schmutz (Resident Economist). Woo Sik Kee contributed to the analysis of taxation. Ubolwann Binmahmood was secretary to the Mission. The report was updated and revised after discussions of the draft with the Government. The Mission gratefully acknowledges the assistance of the Thai Working Group under the chairmanship of Dr. Amnuay Viravan and later Mr. Nukul Prachuabmoh. The members of the Working Group contributed substantially to the preparation of the report and commented on an earlier draft. Naturally, they bear no responsibility for the contents, inter- pretations and the conclusions of the report. THAILAND PUBLIC FINANCE STUDY STATE ENTERPRISES Table of Contents Page No. I. SUMMARY ............ ................................... 1 II. INTRODUCTION .......................................... 2 III. BACKGROUND ............................................ 3 Development of the State Enterprise "Sector" ....... 3 Government Policy in the Third Five-Year Development Plan ............................... 4 IV. INSTITUTIONAL ASPECTS ................................. 6 State Enterprises ................................ 6 Legislation ...................................... 7 Organization ..................................... 9 Relative Importance of Sectors .... .............. 9 V. TAXATION . ............................................. 11 Corporate Income Tax ........ ..................... 11 Remittance to Government ......................... 12 Business and Similar Taxes ....................... 13 VI. TARIFFS ............. .................................. 13 Past and Present Trends .......................... 13 Tariff Adjustment Approval Process .... ........... 14 Tariff Levels .................................... 14 Suggestions on Tariff Policy ..................... 14 Tariff Levels for Capital Intensive Sectors ...... 15 State Railway of Thailand (RSR) .................. 15 Metropolitan Water Works Authority (MWWA) .... .... 16 Power Sector ..................................... 16 VII. FINANCIAL ASPECTS ..................................... 19 Past Financial Trends ....... ..................... 19 Financial Needs .......... ....................... 22 Future Finances .......... ....................... 23 Local Borrowing .......... ....................... 25 APPENDICES 1 - 17 ANNEX D Page 1 THAILAND PUBLIC FINANCE STUDY State Enterprises I. SUMMARY 1.01 The findings and recommendations as included in this report can be summarized as follows: (a) State enterprises have in the past not been a major drain on Thailand's public finances. With the dramatically increasing costs, however, their financial situation could deteriorate quickly without appropriate action on the tariff front (Chapter VI). (b) A number of enterprises of the same sector are presently reporting to different ministries. This is an undesirable situation in the interest of sector coordination and should be corrected (para 4.09). (c) State enterprises established by special decrees are income tax exempt. This means that the legal instrument rather than the activity determines whether a firm is liable to income taxation. This situation should be reviewed and corrected, where appropriate (paras 5.04 and 5.08). (d) With the exception of EGAT which is temporarily exempt, State enterprises have to remit part of their profits to the Government treasury. The percentage of the remittance, which is by nature a dividend, is determined finally by the Government Budget Bureau which apparently means that fiscal considerations sometimes outweigh financial and business necessities. It is recommended that the ANNEX D Page 2 divident payments to the Government should be made by individual enterprises in the light of their financial position and investment requirements within the framework of annual public sector financial plans (para 5.08). (e) Tariffs for capital intensive industries should be set with due regard to the sector investment requirements (para 6.08). (f) With the progressing establishment of a working domestic capital market, local capital requirements should in future be raised through local loans. Government grants should be only made in exceptional cases (para 7.05). II. INTRODUCTION 2.01 This report makes the attempt to provide a description and furnish an evaluation of the Government-owned enterprises in Thailand, and to make recommendations on various relevant aspects. It tries to assess their impact on the Government budget by quantifying to the extent possible the flow of funds from the Treasury of the enterprises and vice versa. The problem of state enterprise taxation, in particular corporate income taxa- tion, is investigated and the tariff policy exanined. Particular chapters are devoted to their legal and organizational background as well as to the reasons for establishing state enterprises and the relevant government policies. 2.02 The total of the state enterprises in Thailand constitutes a rather heterogeneous "sector" of some 80 companies comprising all kinds of activities. It was therefore not possible to deal withi each one of the firms separately in the comparatively limited time available. Consequently, the most important ones in the transportation, fuel supply and public utilities sectors, have been singled out and dealt with in greater detail. This the more as these sectors include those companies which are directly concerned with public service of various sorts and consequently are the ANNEX D Page 3 prime focus among state enterprises as far as tariff policies, taxation policy and public finance are concerned. 2.03 The state enterprises reviewed represent about 80% of the capital investment, 830 of revenues and 90% of gross fixed assets (1972 data) of all state enterprises in Thailand. 2.04 The report does not make any recommendation on organization of the various sub-sectors, on problems of efficiency or management. This would have required detailed appraisals of each company which was not even attempted. Consequently, with the exception of the relationship of state enterprises with various ministries, an aspect on which some changes are suggested, no recommendations on the organizational problems will be made. III. BACKGROUND Development of the State Enterprise "Sector" 3.01 In the past, the evolution of the state enterprise "sector" has not been based on any particular philosophy about the role of government in the economy. Enterprises have been created on an ad hoc basis to meet needs which the Government felt were either not taken care of adequately by the private sector or there was not adequate competition. A further consideration in this context was sufficient production of goods and materials primarily required in times of war. In addition the government tried to counter excessive foreign economic influence in the country. 3.02 From the very early days, however, great emphasis was laid on developing through public funds the capital intensive sectors such as rail- roads, power, water supply and telecommunications. Consequently, during the first Five-Year Development Plan (1962-1966), most of the development expenditures have been channelled to investments in these sectors. In addition, the attempt has been made to pay back excessive debt, a number of industrial firms had incurred, thus laying the basis for the government to become the dominating partner in a number of such enterprises. ANNEX D Page 4 3.03 During the Second Five-Year Development Plan (1967-1971) efforts have been made to improve the efficiency of state enterprises, particularly public utilities and other public services. The results were quite encouraging which is illustrated by the fact that in general state enter- prises have ceased to be a drain on the Government budget; quite to the contrary a number of these enterprises were able to play a more active role than before in supporting national economic and social development by returning more than before of their earnings to the government treasury. 3.04 Over the years, about 80 state enterprises came into existence which can be grouped roughly as follows: 1. Public utilities : 5 organizations 2. Transport : 11 organizations 3. Petroleum 1 organization 4. Communication : 5 organizations 5. Special Public Agencies : 3 organizations (National Housing Authority, Tourist Organization and Industrial Estates Authority) 6. Fiscal Monopolies : 2 organizations 7. Financial Institutions : 5 organizations 8. Manufacturing : 24 organizations 9. Agriculture, Forestry and Fishing : 6 organizations 10. Marketing 5organizations 11. Provincial Companies : 7 organizations 12. Non-Profit Public Agencies : 4 organizations 13. Other agencies : 8 organizations Government Policy in the Third Five-Year Development Plan 3.05 In formulating the Third Five-Year Development Plan (1972-1976), the National Economic and Social Development Board (NESDB - the Government Economic Planning Agency) laid down the following criteria with regard to state enterprises: (a) The Government should continue support of: (i) large public utilities essential for the development of the country and the well-being of its population; ANNEX D Page 5 (ii) essential state enterprises with large capital investments and unattractive rates of return; (iii) enterprises essential to the security of the nation, monopolies which are a major source of Government revenues, and enterprises to promote job creation; and (iv) enterprises established to prevent monopolies by a minority of producers and for ensuring price stabilization. (b) The Government should neither establish new industrial and com- mercial state enterprises nor expand existing ones to compete with private enterprises - except those which are beneficial to the public or essential for national security. (c) The Government should encourage raising of funds by state enterprises directly from the domestic capital market through issuing of bonds or other certificates rather than borrowing from the treasury or receiving Government grants. (d) The Government should control the state enterprises investment policy in view of its consistency with the financial policy. 3.07 Furthermore the Plan proposes to continue the improvement of efficiency in the management of state enterprises, long-term planning, marketing research and similar studies; improved financial planning through employing experienced financial planners and accountants as well as introduction of modern financial control systems is also suggested. 3.08 Although the concept of a number of the above-mentioned items is quite acceptable (for instance the support of low-return investments in the overall economic interest, or the suggestion of increased borrowing from the local market), the Plan is not specific enough in many respects concerning the implementation of the suggestions. For instance there is unfortunately no mechanism which assures that actual expenditures are effectively reconciled with the original plan. Furthermore, it is silent in important matters such as taxation and tariff policy. Later in this report the attempt is made to recommend policies in this respect. ANNEX D Page 6 IV. INSTITUTIONAL ASPECTS State Enterprises 4.01 The National Economic Development Council Act 1959 defines state enterprises as "an activity in which the Government holds the total capital or more than 50% of the equity." More specifically the Budget Procedure Act 1959 (Appendix 1) distinguishes betweern the following possibilities. (a) Organization or business owned entirely by the Government; (b) Company or registered partnership of which more than 50% of the capital is contributed by a Government branch; and (c) Company or registered partnership of which more than 50% of the capital is contributed by another state enterprise, a Government branch or a combination of both. 4.02 With respect to their title, state enterprises can be classified into the following four categories: (a) Established by specific Act with the government being the sole owner - for instance RSR, EGAT, etc. (15 enterprises). (b) Established by Royal Decree according to the "State Enter- prise Establishment Act 1953" with the government being the sole owner - for instance ETO, Rubber Plantation Organization, etc. (19 enterprises). (c) Established by civil code with the status of limited company in which the government holds more than 50% of the capital - for instance Thai Airways, Tourist Co., etc. (27 enterprises). (d) Established by Cabinet Resolution with the capital fixed by government and operated under the supervision of particular ministries - these entities do not enjoy the legal status and institutional independence of the above enterprises. Any legal commitment has to be made by the ministries con- cerned. Included in this group which comprises 19 companies are the Bureau of Lottery, the Thai Tobacco Monopoly, the Alum Factory, etc. ANNEX D Page 7 Legislation 4.03 Apart from specific acts which govern the duties and responsi- bilities of the various state enterprises, a number of laws and regulations, common to all companies, have been issued in the past. Among them are the National Economic Development Council Act 1959 (defining in a general manner the status and purpose of state enterprises), the rules and regu- lations for accounting and financial procedures of state enterprises 1961 (stipulating the minimum accounting requirements), the budget procedure Act 1959 and the regulation on capital budgets of state enterprises 1964. The lEgislation has evolved over the years and seems to work properly. The mission could not detect serious shortcomings and does not propose changes. The important legislation as presently in force is attached as Annexes 1-3. 4.04 The government's real influence on state enterprises is derived from the budget regulations. These regulations ensure that the government has the sole power of approving or rejecting the enterprises investment budgets and also provide the government with a direct influence on the financing plans for such budget. 4.05 The rules to be observed in processing the annual budget can be summarized as follows: (a) After clearance by the board of directors, the management of the state enterprise has to submit the annual investment budget through the respective minister to NESDB's executive committee. The budget must be accompanied by the estimated espenditures of the full investment program and by the operational budget for information. A few of the state enterprises have to submit their budgets to the cabinet directly. In these cases, copies have to be sent to NESDB and the Budget Bureau for evaluation and comment. The budget must be submitted 60 days before the start of the fiscal year. If the budget is not submitted within the stipulated period, the director of the Budget Bureau may, at his discretion, establish such budget. ANNEX D Page 8 (b) In NESDB, the subcommittee on state enterprise budgets (subordinate to the executive committee) evaluates the investment budget and makes the relevant recommendations to the executive committee. The subcommittee consists of representatives of NESDB, the Budget Bureau, the Ministry of Finance, the Audit Council and the Ministry concerned. (c) Within 45 days from submission by the state enterprise, NESDB's executive committee is obliged to agree (or dis- agree) with the investment budget and to submit it to the Cabinet for approval. (d) It is the Government audit council's responsibility to supervise the correct implementation of the budget. 4.06 The budget approval process as outlined above appears to be working well and does not cause aany major delay. Quite to the contrary it seems to force such enterprises, the management of which is not too effective to evaluate accurately and on time the requirements of the following year. 4.07 Further requirements of interest concerning the legislation on state enterprises are: (a) The Minister of Finance is entitled to ask for any information he requires or to authorize competent officers to examine the records of state enterprises. (b) The National Audit Council is the sole authority for auditing the accounts of state enterprises. (c) The boards of directors have to include a representative of the Ministry of Finance. With the approval of the office of the Prime Minister a representative of the budget bureau may serve instead. ANNEX D Page 9 Organization 4.08 According to the prevailing laws each state enterprise reports to a certain ministry which may or may not be the appropriate choice from a professional point of view. Historic and "power" considerations appear to have decided in a number of cases the decision for attachment to a certain ministry rather than organizational necessities. For instance, the two electric power distribution companies MEA and PEA report to the Ministry of the Interior whereas EGAT, the power generating entity, reports to the Prime Minister directly. The same applies to sectors in which certain activities are entrusted to a state enterprise whereas similar activities are left with a government department (Special Highway Authority reporting to the Ministry of the Interior - department of highways in the ministry of Public Works). Similar observations apply to the water supply utilities as described in Annex 13. 4.09 This organization as described is bound to create difficulties as far as problems of coordination within the various sectors is concerned and is therefore undesirable. Consequently the mission suggests that the organizational set-up of state enterprises as far as their reporting to Ministries is concerned be examined thoroughly and corrective measures, where necessary, initiated. Relative Importance of Sectors 4.10 The following table shows the relative importance of various sub- sectors as expressed by their past investments and revenues: 1/ 1/ Excluding State Lottery and Thai Tobacco Monopoly. ANNEX D Page 10 FYs 1969-1972 in % of Total (in Baht million) I. PUBLIC UTILITIES A. Power Investments 5,519 56% Revenues 12,287 33% B. Water Investments 563 6% Revenues 339 1% C. Telecommunication Investments 1,115 11% Revenues 1,457 4% Total Public Utilities Investments 7,197 73% Revenues 14,083 38% II. TRANSPORTATION Investments 1,962 20% Revenues 8,282 22% III. OTHER SECTORS Investments 658 7% Revenues 14,632 40% IV. TOTAL STATE ENTERPRISES Investments 9,817 100% Revenues 36,997 100% Above figures demonstrate the preponderance in investments of the public utilities and, to a lesser extent, transportation sectors. This indicates the importance of a prudent tariff and financial policy as discussed later in this report. 4.11 Each state enterprise has a Board of Directors which is the body for making policy decisions. The boards consist of a varying member of individuals, all appointed by the Council of Ministers. Although not required by law, almost all of the directors are civil servants, in many cases appointed without due regard to the background required for the respective sectors. As a consequence, the boards' qualifications for leadership in policy matters concerning technical, managerial and financial problems are not readily observed. It is suggested that this policy be thoroughly reviewed. ANNEX D Page 11 V. TAXATION 5.01 This chapter deals with the present taxation legislation and procedures applicable to state enterprises. All recommendations are made within this framework, irrespective of the overall review of taxes in the main report, the conclusions of which are, of course, similarly applicable to the state enterprise sector as to the private sector. Corporate Income Tax - 5.02 Concerning income taxation, the original idea in Thailand was to treat the state enteprise sector as such no different than the private sector, i.e. income tax exemption for state enterprises on principle was not contemplated. This did not apply to those entities which serve the public with, what is considered, basic necessities (water, power). 5.03 In the course of time a number of enterprises were created by special act or royal decree. They were either newly established for particular purposes, such as the rubber plantation organization, or they consisted of part of certain government departments for which it was con- sidered desirable to endow them with greater independence (for instance EGAT, TOT, etc.). Both kinds of enterprises, particularly the former government departments, were exempt from paying corporate income tax. This, in effect, only for the simple reason that as a government department they were not liable to taxes either. As a consequence, today's situation is such that enterprises created by special act or decree are income tax exempt (cases 1 and 2 in para 4.02) whereas those established by civil code or cabinet resolution are generally tax liable. 5.04 The facts as described above led to the strange situation that the legal instrument rather than the activity determines whether a state enter- prise is liable to income taxation. This is an undesirable situation. In 1/ At present, the following corporate income tax rates prevail: Net profit up to Baht 500,000 20% Net profit from Baht 500,001-1,000,000 25% Net profit exceeding Baht 1,000,000 30% ANNEX D Page 12 principle, all state enterprises should be subject to the corporation tax. The implications of this on the financial structure of the enterprises should be studied in conjunction with the problem of transfers between the control budget and the enterprise accounts. Remittance to the Government 5.05 Each state enterprise created by special act or royal decree is required by law (normally included in the decree) to transfer its total annual net profit to the Government treasury; the Government in turn is obliged to cover any operational deficit which might occur. This require- ment is equivalent to a 100% dividend payment with a built-in obligation on the part of the government to cover cash deficits (not business deficits since depreciation and allociations to reserves are excluded). 5.06 In effect, this stipulationhhas never been applied in the past because it was recognized that it would deprive the companies even of a minimum of financial independence. The practice which was gradually adopted is that the Government (Budget Bureau) assesses the financial capa- bility of a company and determines the percentage of remittance. Very often it uses as a guideline the corporate income tax schedule for assessing the level of remittance. This procedure has led in some quarters to the erro- neous opinion that the Government remittance is a substitute for the corporate income tax. 5.07 The level of the remittance percentage appears in some cases to be negotiated between the Government and the management of a company whereby the outcome is to a certain extent influenced by the relative strength of the negotiating partners. Furthermore fiscal consideration as more or less "dictated" by the Budget Bureau seems to be more relevant for determining the remittance level than business and financial necessities of the various state enterprises. This is an undesirable situation since it does not pay sufficient attention to the requirements of the various companies and sectors and should be corrected by establishing a system whereby the needs and financ- ing sources of the enterprises are determined for each year within the context of annual financial programs for the total public sector. ANNEX D Page 13 Business and Similar Taxes 5.09 All state enterprises established by special laws are exempt from business and similar taxes in tiheir sales; withvery few exceptions (for instance PAT) they are not exempt in purchasing goods and services. This is either stipulated in the various acts or in the revenue code if certain activities are involved (for instance sale of piped water or electricity). In some cases only the main activity is tax exempt whereas other activities are liable to taxation (for instance EGAT's sale of electricity is free of tax, however, it has to pay for sale of lignite). The mission recommends that the business tax on public utilities which was abolished in 1965 should be reinstated together with a new tax on telephone services. VI. TARIFFS Past a-nd Present Trends 6.01 Up to about two years ago, Thailand experienced little or no inflation. The economy was prosperous and expanding and this with very little inflationary pressure. Thailand's population, therefore, became used to stable prices and tariffs. 6.02 As a consequence, the Government's policy has been to avoid tariff increases and, as a matter of fact, they have not been necessary. Quite to the contrary, due to more efficient operations and making use of the economy of scale, the power companies, for instance, were actually able to decrease tariffs considerably. A further consideration has been to avoid at any cost the burdening of the urban (Bangkok) upper-middle class consumer directly with higher prices to forestall political contro- versy with articulate Bangkok interest grou'ps. 6.03 Little consideration has been given in the past to the discre- pancies in income between the urban (metropolitan) area and the country- side. Indeed one can say that in a number of instances the rural areas have, at least to a certain extent, subsidized the Bangkok area. For instance, until very recently, the railroad passenger tariffs on all lines ANNEX D Page 14 within the 150 km radius of Bangkok were only 60% of the normal fare applica- ble in the first tariff zone. In power, PEA's average tariff level is about 50% higher than the one of IEA, a spread which appears to be wider than is justified by the higher cost of rural electricity supply. Even within the MWWA service area, Bangkok and Thonburi enjoy lower tariffs than the more rural Nonthaburi and Jamut Prakan areas (Appendix 13, page 9). 6.04 In the more recent past, some rate increases have been made in spite of the general reluctance to do so. Among them were the water rates for the Bangkok area and, only some weeks ago, the railroad tariffs. These increases, although made on an ad hoc basis rather than on the grounds of overall economic strategy, nevertheless seem to condition the Thai populace to the necessity of more tariff adjustments to come and thus to prepare the climate for future reasonable tariff policies. Tariff Adjustment Approval Process 6.05 In general, the boards of directors of state enterprises decide internally on the magnitude and structure of the new tariffs, if adjustments are required. The proposal is then submitted to NESDB which, after hearing various groups concerned, recommends (or rejects) the proposal to the Council of Ministers, which makes the final decision. Tariff Levels 6.06 The Government does not have a stated policy on what the '"right" tariff level should be or which the criteria should be to determine the tariffs. Some of the acts of state enterprises include the requirement that tariffs should be set at levels which cover all cost (as defined) and permit a reasonable internal contribution to investment. This leaves a wide range of possibilities for defining the appropriateness of tariffs and is not necessarily an adequate tool for rate making. Suggestions on Tariff Policy 6.07 The following paragraphs deal mainly with public utilities, tele- communication and railroads. This because the other state enterprises are either negligeably small or comprise "businesses" wlhich are exposed to ANNEX D Page 15 competition witlh the private sector; also by nature of their activity, tariff or income distribution policy can be pursued only to a marginal extent. Furthermore the public utilities/telecommunication/railroad sectors provide the most important services for the public directly affecting a large segment of the population and, due to their relative capital intensiveness, have the heaviest impact on the public finances. 6.08 Accordingly, all enterprises not specifically dealt with in the following paragraphs should follow the normal business approach as commonly accepted in their respective sectors. They should be liable to corporate income taxation (para 5.08) and should declare dividends in line with a sound financial policy. Tariff Levels for Capital Intensive Sectors 6.09 Basically it is the main interest of, say, a public utility to cover its operational and capital costs and to earn an adequate return on investment so that its financial structure maintains a reasonable balance between equity and borrowings. This is a sound concept and should be fol- lowed. It should, in principle, also be followed if tariffs are used as a vehicle to subsidize certain regions or classes of consumers; in the latter case regions or consumer classes should be penalized and raise the funds for subsidization. Cross subsidization between sectors should be avoided whenever possible because of its distorting effect on the operation of state enterprises and possibly the economy; as a matter of fact through creating "independent" companies the government has indicated that it is interested in self- sufficient operation of certain sectors. State Railway of Thailand (RSR) 6.10 In order to reach a modest return on investnment of about 2%, which would keep the entity viable, selected tariff adjustments resulting in an overall 20% tariff increase will have to be made. Only very recently, some of the tariffs were raised and, as far as the mission understands from a newspaper clipping, the anomaly of the highly subsidized Bangkok area ANNEX D Page 16 passenger tariffs (Appendix 7, page 11) was rescinded. The mission regards these actions as a step in the right direction and has no further comments. Metropolitan Water Works Authority (MWWA) 6.11 Among all state enterprises reviewed, MWWA is possibly in the worst financial situation. This, however, appears not only to be a tariff problem. It is at least to the same extent due to managerial and technical difficulties (for instance a meter calibrating and replacement program which has to be carried out to decrease unaccounted for water losses). A compre- hensive recovery program is underway with the help of consultants, and the mission has therefore no particular recommendations. 6.12 As can be seen from Annex 13, there is still a large discrepancy between the 1MWWA tariffs, which are lower, and the water tariffs in rural areas charged by various agencies. The mission did not have an opportunity to examine this question in detail, in particular since the rural water supply is carried out by Government departments from which useful cost data are not available. This problem, however, seems to open a wide field of activity and ensuing corrective measures, in particular as far as re- gional income distribution is concerned. Power Sector 6.13 The power sector Thailand's is served by three companies, the Electricity Generating Authority of Thailand (EGAT), the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA). EGAT is responsible for every generation and high voltage transmission throughout the country. It sells the energy to MEA and PEA for distribu- tion and to a few selected large industries. MEA is the distribution agency for the Bangkok area; it purchases all energy from EGAT and does not generate power. PEA is responsible for energy distribution throughout the rest of the country; in some isolated areas not inter-connected with the main grid it generates its own energy. 6.14 In the past tariffs have been set separately for each of the three companies without much regard for the sector as a whole. Both MEA A NNEX D Page 17 and PEA trying to keep their tariffs as low as possible attempted to purchase the energy from EGAT at the lowest possible price. With the steep demand increase prevailing, EGAT's investment program has been very heavy, about three to four times the combined investments of MEA and PEA. As a consequence, EGAT's internal cash generation fell to levels below 30% which, under the circumstances in Thailand, is barely acceptable. 6.15 PEA, whose market is much more difficult to serve than the one of MEA, has been barely able to keep up with a reasonable investment program despite the fact that its tariffs are on an average about 50% above MEA's level. MEA with its compact market on the other hand has been able to finance a substantial portion (about 80%) from its internal cash generation with revenues earned at very reasonable tariff levels. 6.16 Summarizing the power sector analysis, the following conclusions can be drawn: (a) EGAT's tariffs appear somewhat low; (b) PEA, despite its comparatively high tariffs, is barely in a position to meet its commitments; and (c) MEA, in spite of reasonable tariffs, is making large profits and is able to remit substantial sums to the Government. 6.17 It is the mission's opinion that the relative tariff levels between the three enterprises should be modified so as to distribute the revenues from power sales more evenly, permitting each company to meet its financial requirements in a balanced manner. At the same time, con- sideration could be given to introducing a mechanism which permits a certain subsidization of the rural tariffs at the expense of the urban (Bangkok) tariffs. This is desirable in the light of creating better development opportunities in the rural areas and the income differential between Bangkok and the rest of the country. 6.18 One way of implementing these policies would be to merge the relevant authorities under one administration. This is worth studying. ANNEX D Page 18 As an alternative, the mission has developed a system which demonstrates a way of rescheduling the eletricity tariffs along the lines mentioned above and at the same time make the power sector as self-supporting as possible, i.e. in the ideal case no Government contributions should have to be made to the sector. The detailed calculations are included in Appendices 14-16 and Annex 17. The system is based on the following criteria: (a) The assets of the total power sector (EGAT, MEA and PEA together) should earn a certain rate of return (in our example, 10%); (b) EGAT's tariffs for sales to MEA and PEA should be the same and, together with its revenues to other customers, should provide the pre-determined return; and (c) MEA and PEA should sell their energy at equal tariffs which should be set at levels to earn the pre-determined rate of return on the combined assets of MEA and PEA (in our example, 10%). These suggestions would assure that the tariffs are at the "right" level and that the rural population enjoys an "equalizing" tariff subsidy. They would not yet assure, however, that each of the companies is able to finance the equal percentage of its annual investments through internal cash genera-- tion, a necessary feature if the concept of balanced financing in the sector is to be maintained. Consequently, the internal funds in the sector have to be re-allocated in a way that the sector-internal cash generation ex- pressed as percentage of annual investments is equal for each enterprise. Consequently, the following additional actions have to be taken: (a) Calculation of the percentage of investment financing through internal cash generation for the whole sector; (b) Application of this percentage for each enterprise separately; and ANNEX D_ Page 19 (c) Re-arrangement of the sector-internally generated funds through "equalization payments" in a way that each enterprise receives the equal share. 6.19 The system as outlined above and in more detail in Appendices 14-17 would reauire a strong supervising agency which would be charged with super- vising the tariff making and revenue rescheduling process. A good candidate for these functions would be NESDB which already at present exerts decisive power in the important economic decisions of the sector (tariffs, investment budget, etc.). 6.20 The mission has no strong views as to how the equalization pay- ments should be administered. One possibility could be to treat them similar to the remittance-to-Government transfers, with the only exception that they would constitute funds earmarked for the power sector. Another way could conceivably be to add appropriate, clearly identifiable surcharges to EGAT's tariffs which would be higher in the case of sales to MEA than to PEA. VII. FINANCIAL ASPECTS Past Financial Trends 7.01 In the past, major public enterprises have not been a drain on the Government's budget. As can be seen from Annexes 4 and 5 (page 1), the total balance of fund flows has actually been in favor of the Government treasury over the period 1969-1972. 7.02 On the basis of 1973 results (in part estimated, in part actual), the financial status of all state enterprises is as follows: ANNEX D Page 20 FY 1973 Percentage Percentage of (in Baht million) Within Sector Sector vs. Total I. PUBLIC UTILITIES (Power, Water and Telecommunication) A. Cash Expenses Operating Expenses 1/ 3,100 43% 32% Debt Service 671 9% 85% Gov't. Remittance 128 2% 36% Investments 3,324 46% 76% Total Cash Expenses 7,223 100%1 48% B. Financing Revenues 5,339 74% h2% Borrowing 1, 517 21% 89% Gov!t. Loans 367 5% 77% Gov't. Grants -- -- -- Total Financing 7,223 100% 48% II. TRANSPORTATION A. Cash Expenses Operating Expenses 1/ 1,223 59% 13% Debt Service 97 5% 12% Gov't. Remittance 44 2% 12% Investments 702 34% 16% Total Cash Expenses 2,o66 100% 14% B. Financing Revenues 1,796 87% 14% Borrowing 180 9% 11% Government Loans -- -- -- Government Grants 90 4% 81% Total Financing 2,066 100% 14% 1/ Including Variations in Working Capital. ANNEX D Page 21 FY 1973 Percentage Percentage of (in Baht miLlion) Within Sector Sector vs. Total III.. OTHER SECTORS 2/ A. Cash Exbpenses Operating Expenses 1/ 5,291 91% 55% Debt Service 18 -- 3% Gov't. Remittance 186 3% 52% Investments 331 6% 8% Total Cash Expenses 5,826 100% 38% B. Financing Revenues 5,681 98% 44% Borrowing 14 -- -- Gov't. Loans 110 2% 23% Gov't. Grants 21 -- 19% Total Financing 5,826 100% 38% IV. TOTAL STATE ENTERPRISES 3/ A. Cash Expenses Operating Expenses 1/ 9,614 6h% 100% Debt Service 786 5% 100% Govtt. Remittance 358 2% 100% Investments 4,357 29% 100% Total Cash Expenses 15,115 100% 100% B. Financing Revenues 12,816 85% 100% Borrowing 1,711 11% 100% Gov't. Loans 477 3% 100% Gov't. Grants 111 1% 100% Total Financing 15,115 100% 100% 1/ Including Variations in Working Capital. 2/ Rough compilation from rather unreliable NESDB sources. 3/ Excluding State Lottery and Thai Tobacco Monopoly. ANNEX D Page 22 7.03 Above table indicates the preponderance in investments of the public utilities and transportation sectors which together account for 92% of the annual investments. Their capital intensiveness is further illustrated by the fact that they absorb 100% of the borrowing from sources other than the Government and 78% from the Government. 7.04 The net internal cash generation expressed as a percentage of investments was as follows in 1973: Net Internal Cash Generation Investment Percentage ---- -- in Baht million I. Public Utilities 1,440 3,324 43% II. Transportation 432 702 62% III. Other Sectors 186 331 56% Total 2,058 4,357 47% Above percentage (47%) is rather high because of a relative drop in the investment program in this years; over the past 4-year period (1970-1973) however, it never dropped below about 30% for the state enterprise sector as a whole. This is a reasonable figure quite within the range of comparable enterprises in other countries. Financial Needs 7.05 As shown in detail in Annex 6, the anticipated annual investment needs of all state enterprises are expected to triple over the next 4 years (from about Baht 2.5 billion in 1972 to Baht 7.6 billion in 1976), with power leading the way. In addition serious increases in operating cost, in particular fuel (estimated at 60% in 1974 and another 40% in 1975) are pre- sently being experienced and are likely to occur also in future to a certain extent. Consequently, the prevailing favorable overall financial situation of the state enterprises is bound to deteriorate quickly without adequate remedy from the revenue side. ANNEX D Page 23 Future Finances 7.06 In Annexes 4-17 the attempt has been made to quantify the future financial results of the state enterprises and to show their impact on the Government budget. This impact will largely depend on decisions to be made in the field of tariffs which in some of the sectors can become quite painful. The mission estimates that, for instance in power, tariff increases of up to 40% for MEA and 30% for EGAT will be required (if the socially oriented rearrangement of revenues, explained in Appendices 14-17, will be introduced). 7.07 The projections in Appendices 4 through 17 have been made in two variations. Concerning expenditures, all expected increases, in particular for fuel, have been included in both variations. In order to highlight the importance of timely tariff adjustments, however, Appendix 4 (before revenue adjustments) quantifies the revenues at tariff levels prevailing at the end of 1973, Appendix 5 (after revenue adjustments) after appropriate tariff adjustments in various sectors. 7.08 Summarized, the projections and their impact on the Government budget are as follows: ANNEX D Page 2)4 Total State Enterprises 1974 1975 1976 1977 1978 Total (in Baht million) A. Before Revenue Adjustments 1. Fund Inflow from Gov't. a. Transfers 2/ 1,026 2,666 2,697 2,262 1,857 10,508 b. Loans 3/ - 81 15 15 - - 111 Total Inflow 1,107 2,6B1 2,712 2,262 1,8; 1T0,619 2. Fund Outflow to Gov't. a. Corporate Income Tax 94 96 102 102 103 497 b. Remittance to Gov't. 358 419 452 474 481 2,184 c. Business Tax 110 115 120 125 130 600 d. Amortization and Interest 167 162 135 133 130 727 Total Outflow 729 792 o- TT v o 3. Net Flow of Funds 378 1,889 1,903 1,428 1,013 1 B. After Revenue Adjustments 1. Fund Inflow from Gov't. a. Transfers 436 1,431 1,223 813 278 4,181 b. Loans 3/ 81 15 15 - -_il_ Total Inflow 517 1,44 1,235 BT3 7 14,292 2. Fund Outflow to Gov't. a. Corporate Income Tax 94 96 102 102 103 497 b. Remittance to Gov't. 292 383 406 420 429 1,930 c. Business Tax 110 115 120 125 130 600 d. Amortization and Interest 167 162 135 133 130 727 Total Outflow W750 792 3-73772 3. Net Flow of Funds (146) 690 475 33 (514) 538 1/ Without State Lottery and Thai Tobacco Monopoly. 2/ Grants or loans, depending on future Government policy and the development of a working domestic capital market. 3/ As far as committed. ANNEX D Page 25 7.09 Above projections give a clear indi ation of the importance of a circumspect and responsible tariff policy. Over the 1974/78 period more than Baht 6 billion can be saved. The net internal cash generation in the sector, which, for the major enterprises would drop to an estimated level of about 10% of investments (variation "A") if tariffs stay at 1973 levels would maintain the desirable level of 25% to 30% if the necessary tariff adjustments are made (variation "B"). Local Borrowing 7.10 Even with adequate tariffs some of the state enterprises will have to raise local funds for supplementing foreign loans and credits. This applies in particular to the capital intensive sectors where financing of the total local component through internal cash generation would increase tariffs to unnecessary high levels. Due to the lack of a working domestic capital market, these funds have in the past been mainly contributed by the Government through grants and, in rare cases, loans. With the gradual establishment of a local capital market, however, these funds could be raised without Government assistance, thus completely relieving the Govern- ment budget from any financial burden on the part of the state enterprises. LIST OF APPENDICES Appendix 1 Summary of the Budget Procedure Act B.E. 2502 (1959) as Amended Appendix 2 Summary of the Rules and Regulations for Accounting and Financial Procedures of State Enterprises B.E. 2504 (1961) Appendix 3 Summary of the Regulation on Capital Budgets of State Enterprises B.E. 2507 (1964) Appendix 4 Total State Enterprises - Summary of Flow of Funds (Before Revenue Adjustments) Appendix 5 Total State Enterprises - Summary of Flow of Funds (After Revenue Adjuxstments) Appendix 6 Investments Appendix 7 State Railway of Thailand (RSR) Page 1 Actual and Forecast Income StatemXents 1969-1978 (Before Revenue Adjustments) Page 2 Forecast Sources and Applications of Funds 1973-1978 (Before Revenue Adjustments) Page 3 Actual and Forecast Income Statements 1969-1978 (After Revenue Adjustments) Page 4 Forecast Sources and Applications of Funds 1973-1978 (After Revenue Adjustments) Page 5 Notes and Assumptions on Income Statements Page 7 Notes and Assumptions on Sources and Applications of Funds Page 8 Long-Term Borrowings as of September 30, 1973 Page 9 Summary of the RSR-Act Page 11 Tariffs and Fares Page 12 General Observations Appenr-ix 8 Express Transport Organization (ETO) Page 1 Actual and Forecast Income Statements 1969-1978 Page 2 Summary of the ETO-Act Page 3 General Observations Appendix 9 Port Authority of Thailand (PAT) Page 1 Actual and Forecast Income Statements 1969-1978 (Before and After Revenue Adjustments) -2- Page 2 Forecast Sources and Applications of Funds 1973-1978 (Before Revenue Adjustments) Page 3 Forecast Sources and Applications of Funds 1973-1978 (After Revenue Adjustments) Page 4 Notes and Assumptions on Financial Data 1969-1978 Page 5 Principal Rates and Charges Page 6 General Observations Appendix 10 Special Highway Authority (SHA) Appendix 11 : Telephone Organization of Thailand (TOT) Page 1 Actual and Forecast Income Statements 1969-1978 Page 2 Forecast Sources and Applications of Funds 1973-1978 Page 3 Notes and Assumptions on Financial Data 1969-1978 Page 4 Long-Term Borrowings as of September 30, 1973 Page 5 Summary of the TOT-Act B.E. 2497 (1954) Page 7 Summary of Tariffs Page 13 General Observations Appendix 12 Fuel Organization (FO) Page 2 Summary of the FO-Act 1960 Page 14 General Observations Appendix 13 Metropolitan Water Works Authority (MWWA) Page 1 Actual and Forecast Income Statements 1969-1978 Page 2 Forecast Sources and Applications of Funds 1973-1978 Page 3 Notes and Assumptions on Financial Data Page 6 Long-Term Borrowing as of September 30, 1973 Page 7 Summary of the MWWA-Act 1967 Page 9 Tariffs Page 10 General Observations and Sector Information Appendix 14 Electricity Generating Authority of Thailand (EGAT) Page 1 Actual and Forecast Income Statements 1970-1978 (Before Revenue Adjustments) Page 2 Forecast Sources and Applications of Funds 1974-1978 (Before Revenue Adjustments) Page 3 Foreeast Income Statements 1974-1978 (After Revenue Adjustments) Page 4 Forecast Sources and Applications of Funds 1974-1978 (After Revenue Adjustments) Page 5 Notes and Assumptions on Financial Statements Page 6 Summary of the EGAT-Act 1968 Page 8 Long-Term Borrowings as of September 30, 1973 Page 14 Tariffs - 3 - Appendix 1' Metropolitan Electricity Authority (MEA) Page 1 Actual and Forecast Income Statements 1969-1978 (Before Revenue Adjustments) Page 2 Forecast Sources and Applications of Funds 1973-1978 (Before Revenue Adjustments) Page 3 Forecast Income Statements 1974-1978 (After Revenue Adjustments) Page 4 Forecast Sources and Applications of Funds 1974-1978 (After Revenue Adjustments) Page 5 Notes on Financial Statements Page 6 Tariffs Page 10 Summary of the MEA-Act 1958 Appendix 16 Provincial Electricity Authority (PEA) Page 1 Actual and Forecast Income Statements 1969-1978 (Before Revenue Adjustment) Page 2 Forecast Sources and Applications of Funds 1973-1978 (Before Revenue Adjustment) Page 3 Forecast Income Statements 1974-1978 (After Revenue Adjustment) Page 4 Forecast Sources and Applications of Funds 1974-1978 (After Revenue Adjustment) Page 5 Notes on Financial Statements Page 6 Summary of the PEC-Act 1960 Page 8 Tariffs Page 10 Accelerated Rural Electrification Appendix 17 Power Sector of Thailand - Rearrangement of Revenues Appendix ' page I of pages SJMMARY of the, 3udget Procedure Oct. B.E. 2502 (19>9) as Amended- (as far as it relates to State Enterprises) Section 4 "'State Enterprise" is defined as: (a) government organizations or business units ovmed entirely by the government; (b) a company or registered partnership or which more than 50 of the capital is contributed by a government branch; (c) a company or registered partnership of which more than 50% of the capital is contributed (i) by a government branch; (ii) by a state enterprise; and (iii) by (i) and (ii); (d) a company or registered partnership of which more than 50% of the capital is contributed by a government branch and/or state enterprise under (a) and/or (b) and/or (c); and (e) a company or registered partnership of which more than 50% of the capital is contributed by a government branch and/or state enterprise under (a) and/or (b) and/or (c) and/or (d). / Budget Procedure Act (No. 2) B.E. 2503 (1960) and Budget Procedure Act (No. 3) D.E. 2511 (1968) Appendix 1 Page 2 of T pages Section 6 (2) The Director of the Office of the Budget has the power and duty to analyze budgets and expenditures of ........... ...... state enterprises (see Bection 6 of the capital budget regulations). Section 8 The annual budget submitted to the legislature shall consist of: (5) a report concerning the finances of state enterprises. Section 12 The heads of ................ state enterprises shall appoint an official as budget officer who shall be responsible for the state enterprisets budget. Section 13 The minister responsible for the ................ state enternrise Or t,he minister who by law supervises or controls the business of the state enter- prise shall be responsible for filing the annual budget of that .............. stat^ enterprise with the director of the budget office within the period stipulated by the budget office director (see Section 22 of regulations of accounting and financial procedures and Section 7 of the capital budget regu- lations). In case a state enterprise is a company or registered partnership, the minister responsible for the government branch or state enterprise which owns the capital shall be responsible for timely submission of the annual budget to the budget office director. Appendix 1 Page 3 of 4 pages If the annual budget of a state enterprise is not filed within the stipulated period, the budget office director may, at his discretion, estab- lish such budget. Section 19 An amount set aside for expenditure by .................. a state enter- prise under a certain item of an annual budget or supplementary budget may not be transferred or used under another item unless authorized by the director of the budget office; in case such transfer entails activities not budgeted originally (for instance new projects), the budget director can authorize spending only after approval by the Council of Ministers. Section 22 The Minister of Finance is entitled to simmon ............... state enterprises to provide any information he requires, and to authorize competent officers to examine all books, accounts, documents and other information of ........ ............ .... . state enterprises. Section 23 State enterprises may make payments or incur obligations only as pro- vided for in the annualbudget or supplementary budget, if any, or as empowered by other laws; in case of instalment payments, or incurring obligations for in- stalment payments, for annual budget items, approval has to be given before such payments can be made. In case of urgent necessity, the Council of Ministers is empowered to authorize payments or incurrence of obligations prior to approval of funds for the particular instalment or incurrence of obligations in excess or in addition to those specified in the annual budget or supplementary budget. Appendix l Page 4 of 4 pages If a state enterprise which is not a juristic person needs to borrow funds for operations for not more than one year, the ministry in charge has the power to permit the borrowing with the approval of the Minister of Finance. If the amount exceeds Baht 3 million, prior approval of the Council of Ministers is required. Such borrowings may be disbursed to the state enterprise directly without channelling through the treasury. February 25, 1974. Appendi2 Page 1 ofT 3 papes SUMMARY of the Rules and Rezulations for Accounting and Financial Procedures of State Enterprises B.E. 2504 (1961) Section 4 State enterprises have to follow proper accounting procedures. Their financial transactions have to be properly recorded and have to reveal the financial standing. Section 5 State enterprises shall normally close their books with the end of the government fiscal year. Moreover, under certain circumstances and with the approval of the ministry of finance, a different 12-month period can be chosen. Section 6 Accounting transactions showing actual results must be executed in accordance with the regulations as issued from time to time by the ministry of finance. Sections 7-8 Depreciation rates must be based on the useful lives of assets. The depreciation period has to start with installation or commissioning of an asset. Changes in depreciation policy or rates have to be approved by the ministry of finance. Section 9 Inventories have to be valued at cost or market value, whichever is lower. Changes in the principle of inventory valuation have to be approved by the ministry of finance. Appndix 2 Page 2 of 4 pages Section 10 In case accounts receivable from debtors other than government bodies have been overdue for more than 2 years or payment has become doubtful, a provision for bad debts in the respective amount has to be made. Such pro- visions are treated as expenses in the year of their establishment. Reduc- tions in the reserve for bad debts in a particular year have to be treated as extraordinary income of that year. Section 13 In general, the annual surplus can be used for the following purposes: (a) bonus payments to the board of directors and the employees; (b) dividend payments to shareholders and ministry of finance; (c) creation of reserves as required by law; and (d) payment of income tax. The use as provided for under (a) and (b) must be approved by the ministry of finance. Sections 14-19 Assets in the balance sheet must be classified, as a minimum, as current, fixed and intangible assets. Capital and borrowing must be clearly indicated; the accumulated surplus must be shown separately from the capital account. The nature of bank deposits (current or time deposits) must be stated and, in case of time deposits, their terms and conditions must be explained. Section 20 The National Audit Council is the sole authority to audit the accounts of state enterprises. Appendix 2 Page 3 of 4 pages Section 21 In case the Audit Council detects discrepancies in the books of a state enterprise, it has to inform the enterprise immediately together with sugges- tions or corrective measures. Should the state enterprise disagree with the Council's findings, the ministry of finance passes final decision (see also Section 13 of the capital budgets regulations). Section 22 State enterprises not created by special law must close their accounts within 120 days after the end of the accounting period. The audit council is obliged to certify the accounts within 45 days of submission. Section 24 Bank deposits of state enterprises, in general, have to be in the form of current accounts. In exceptional cases the ministry of finance can agree to interest-bearing time deposits. Section 27 On principle, state enterprises have to remit their profits to the govern- ment. It is, however, the government's (Budget Bureau) prerogative to assess a state enterprise's ability to contribute and, in consultation with the management, to fix the amount to be remitted. The above process does not apply to state enterprises registered as limited companies which declare dividends of which the government receives its share according to its participation in the capital. Appendix 2 Page LO 4 pages Section 28 All state enterprises have to prepare their budgets classified into investment budgets and operational budgets. Both budgets have to be approved by the board of the enterprise and serve as a guide for conducting operations. The investment budget, whether financed from the goverNment budget or otherwise, has first to be approved by the National Economic and Social Development Board (NESDB). In cases where special laws require budget ap- proval by the Cabinet, copy of the budget has to be submitted at the same time to NESDB. NESDB must receive the budget 60 days before the new fiscal year and, in turn, has to react within 45 days. In case an enterprise wishes to change certain items in the budget, NESDB has to react within 30 days to such request (see also Section 7 of the capital budget regulations). Section 29 All state enterprises must have a civil servant from the ministry of finance serving as a member of the board. In his place an official of the Budget Bureau (which reports to the Office of the Prime Minister) can be appointed by the ministry of finance with the approval of the office of the Prime Minister. February 25, 1974 Appendix 3 Page I of 4 pages SIIMARY of the Regulation or CaPital Budgets of State Eaterprises B.E 2507 (1964) The NE(S)DB Act 2502 (as amended by Act of 2503, Article 12(4) provides that state enterprises have to submit their annual capital budget for NESDB's consideration and presentation to the Cabinet. The following regulations establish the procedures for budget approval: Section 3 Capital Budget: (a) expenditures on fixed assets for expansion or replece- ment of the whole or a major part of the existing enterprise; (b) expenditures for improvements which will benefit the enterprise over a period of more than one year; and (c) expenditures for acquiring a share in another company. Fixed Assets: Assets whose useful lives exceed one year. Spare parts, office furniture and equipment, and small tools are excluded. For the purpose of this Regulation, State Enterprises are defined as in Section 4 of the Budget Procedure Act B.E. 2502 (1959). App2endix 3 Page 2 of 4 pages State Enterprise Board: (a) committee established under this regulation or under the statutes of a particular state enter- prise; or (b) in the absence of such committee, the ministry controlling the state enterprise. Section 4 State enterprises must submit their full capital budget (total cost of capital projects) and their annual capital budget to the "NESDB Executive Committee" for approval. Any changes or modifications of investment plans as approved must be re-presented for approval. The committee must be in- formed each year of the estimated expenditures of the full investment program. This information must accompany the annual capital budget. Above information has to be submitted through the respective ministħies. In the cases where annual capital budgets under existing laws are submitted directly to the Cabinet, copies must at the same time be sent to NESDB and the Budget Bureau for evaluation and comment for the Cabinet's consideration. Section 5 The stipulations of Section 4 apply likewise to additional capital budgets submitted during any fiscal year. Section 6 Evaluation of the capital budgets and recommendations to the NESDB Executive Committee are made by the "Subcommittee on State Enaterprise Budgets" Appendix 3 Page 3 of 4 pages (comprised of representatives of NESDB, Budget Bureau, Ministry of Finance, Audit Couneil, and of the ministry concerned). Section 7 The capital budgets have to be submitted to NESDB at least 60 days before the beginning of the following fiscal year and NESDB has to complete the evaluation within 45 days. Section 8 Capital budgets may include contingency reserves which can be used for price increases. The use of these reserves is normally approved by the sub- committee (Section 6); it can, however, delegate this power to the manager of the state enterprise. Section 9 In case of emergency, a state enterprise can acquire fixed assets without prior approval from NESDB. However, the Cabinet or the NESDB Executive Committee and the ministry concerned, as the case may be, must be informed of this action as soon as possible. Section 10 Transfers between budget items normally have to be approved by the sub- committee (Section 6) and the ministry concerned has to be informed; however, the manager of the enterprise can be empowered to make such transfers in which case NESDB and the ministry concerned have to be informed. Appendix 3 Page 4 of h pages ioection 12 NESDB is in charge of monitoring budgets of state enterprises. Section 13 It is the duty of the Audit Council to notify a state enterprise when it fails to observe these regulations. Should the enterprise not agree with the recommendations of the Audit Council, the case in question must be sub- mitted to NlSDB for reconsideration. February 25, 1974. Appendix 4 Page lof 6 pages Before Revenue Adjustments Summary of Flow of Funds Total State Ehterprises 1/ Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 ---- in Baht million --------- ---- ------ A. Fund Inflow from Gov't. 1. Transfers - 297 266 292 162 692 1,026 2,666 2,697 2,262 1,857 2. Loans 3/ 169 271 484 327 138 81 15 15 - - Total Inflow 466 537 776 489 830 1,107 2,681 2,712 2,262 1,857 B. Fund Outflow to Gov't. 1. Corporate Income 43 44 37 63 73 94 96 102 102 103 Tax 2. Remittance to Gov't. 334 296 357 426 339 358 419 452 474 481 3. Business Tax 74 80 85 109 97 110 115 120 125 130 4. Amortization and Interest 96 114 119 132 164 167 162 135 133 130 Total Outflow 547 534 598 730 673 729 792 809 834 844 C. Net Flow of Funds (81) 3 178 (241) 157 378 1,889 903 1,428 1,013 1/ Without State Lottery and Thai Tobacco Monopoly. 2/ Assumed as grants since loans would aggravate the financial situation. of the state enterprises through additional debt service. 3 As far as committed. Appendix 4 Page 2 of 6 pages Flow of Funds Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 --- ----- in Baht million ----------------- State Railway of Thailand (RSR) A. Fund Inflow from Gov't. 1. Transfers 73 40 72 26 90 76 193 299 219 264 2. Loans - - - - _ - - - - - Total Inflow 73 40 72 26 90 76 193 299 219 264 B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. 12 12 24 23 3 - - - - - 3. Business Tax - - - - - - - - - - 4. Amortization and Interest 9 9 10 10 11 15 15 15 15 15 Total Outflow 21 21 34 33 14 15 15 15 15 15 C. Net Flow of Funds 52 19 38 (7) 76 61 178 284 204 249 Express Transport Organiza- tion (Era) A. Fund Inflow from Gov't. 1. Transfers - - - - - - - - - 2. Loans - - - - _ _ _ Tota)l inflow - - - - - - - - - - B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. - - 21 13 10 9 12 11 11 8 3. Business Tax - - - - - - - - - 4. Amortization and Interest - - - - - - _ - - _ Total Outflow - - 21 13 10 9 12 11 11 8 C. Net Flow of Funds - _ (21) (13) (10) ( 9) (12) (11) (11) ( 8) Appendix Ij Page 3 of 6 pages Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 - in Baht million ---------------------- Port Authority of Thailand (PAT) A. Fund Inflow from Gov't. 1. Transfers - - - - - 74 29 43 50 71 2. Loans - - - - - - - - - - Total Inflow - - - - - 74 29 43 50 71 B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Govtt. 36 34 29 21 11 3 - - - - 3. Business Tax - - - - - - - - - - 4. Amortization and Interest - - - - - - - - - - Total Outflow 36 34 29 21 11 3 - - - - C. Net Flow of Funds (36) (34) (29) (21) (11) 71 29 43 50 71 Telephone Organization of Thailand (TOT) A. Fund Inflow from Govtt. 1. Transfers 16 2 1 - - 125 325 50 - - 2. Loans - - 45 - - - - - - - Total Inflow 16 2 46 - - 125 325 50 - - B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. 22 28 39 57 63 47 55 70 48 53 3. Business Tax - - - - - - - - - - 4. Amortization and Interest 26 26 25 25 24 23 21 - - - Total Outflow 48 54 64 82 87 70 76 70 48 53 C. Net Flow of Funds (32) (52) (18) (82) (87) 55 249 (20) (48) (53) Appendix L Page 4 of 6 pages Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 197O Fuel Organization (FO) ------- in Baht million ----------------------- A. Fund Inflow from Gov't. 1. Transfers - - - - - - - - - - 2 . Loans _ - - - - - - - - - Total Inflow - - - - - - - - - _ B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Govtt. 65 65 32 66 45 69 106 113 115 122 3. Business Tax - - - - - - - - - - 4. Amortization and Interest - - - - - - - - - - Total Outflow 65 65 32 66 45 69 106 113 115 122 C. Net Flow of Funds (65) (65) (32) (66) (45) (69) (106) (113) (115) (122) Metropolitan Water Works Authority (MWWA) A. Fund Inflow From Gov't. 1. Transfers 108 77 151 99 139 74 450 630 516 152 2. Loans - - 97 68 128 50 - - - - Total Inflow 108 77 248 167 267 124 450 630 516 152 B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Govtt. - - - - - - - - - - 3. Business Tax - - - - - - _ _ _ _ 4. Amortization and Interest - - - - - - - - - - Total Outflow - - - - - - - - - - C. Net Flow of Funds 108 77 248 167 267 124 450 630 516 152 - - - _ - _ _ = Appendix 4 Page 5 of 6 pages Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 -- in Baht million ----------------- Electricity Generating Authority of Thailand (EGAT) A. Fund Inflow from Gov't. 1. Transfers 27 72 23 19 443 584 1,496 1,524 1,295 1,180 2. Loans 149 261 297 235 - - - - - Total Inflow 176 333 320 254 443 584 1,496 1,524 1,295 1,180 B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. 52 - - - - - - - - - 3. Business Tax - - - - - - - - _ - 4. Amortization and Interest 54 62 78 90 120 118 116 110 108 105 Total Outflow 106 62 78 90 120 118 116 110 108 105 C. Net Flow of Funds 70 271 242 164 323 466 1,380 1,4124 1,187 1,075 Metropolitan Electricity Authority (MEA) A. Fund Inflow from Gov't. 1. Transfers - - - - - - - - - 2. Loans 9 9 - - - - Total Inflow - - 9 9 - - - - - - B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. 47 46 65 83 65 66 69 81 89 90 3. Business Tax - - - - - - - - - - 4. Amortization and Interest 3 12 - - 1 3 3 3 3 3 Total Outflow 50 58 65 83 66 69 72 84 92 93 C. Net Flow of Funds (50) (58) (56) (74) (66) (69) (72) (84) (92) (93) Appendi x X page 6 of 6 pages Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 19-77 1970 ----------- in Baht million ------------------- Provincial Electricity Authority (PEA) A. Fund Inflow from Gov't. 1. Transfers 35 43 29 4 - 80 153 131 162 170 2. Loans -20 10 36 - - - - - Total Inflow 55 53 65 4 - 80 153 131 162 170 B. Fund Outflow to Govtt. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Govtt. - - - - - - - - - - 3. Business Tax - - - - - - - - 4. Amortization and Interest 2 2 3 3 3 3 2 2 2 2 Total Outflow 2 2 3 3 3 3 2 2 2 2 C. Net Flow of Funds 53 51 62 1 ( 3) 77 151 129 160 168 Other State Enterprises A. Fund Inflow from Govtt. 1. Transfers 38 32 16 14 20 13 20 20 20 20 2. Loans - - - 15 10 31 15 15 - - Total Inflow 38 32 16 29 30 44 35 35 20 20 B. Fund Outflow to Gov't. 1. Corporate Income Tax 43 44 37 63 73 94 96 102 102 103 2. Remittance to Gov't. 100 111 147 163 142 164 177 177 211 208 3. Business Tax 74 80 85 109 97 110 115 120 125 130 4. Amortization and Interest 2 3 3 4 5 5 5 5 5 5 Total Outflow 219 238 272 339 317 373 393 404 443 446 C. Net Flow of Funds (181) (206) (256) (310) (287) (329) (358) (369) (423) (426) Appendix 5 Page 1 of 4 pages After Revenue Adjustments Summary of Flow of Funds 1/ Total State Enterprises - Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 ----------- --------- in Baht million ----- --------------- A. Fund Inflow from Gov't. 1. Transfers 2/ 297 266 292 162 692 436 1,431 1,223 813 278 2. Loans 3/ 169 271 484 327 138 81 15 15 _ _ Total Inflow 466 537 776 489 830 517 1,446 1,238 813 278 B. Fund Outflow to Gov't. 1. Corporate Income Tax 43 44 37 63 73 94 96 102 102 103 2. Remittance to Gov1t. 334 296 357 426 339 292 383 406 420 429 3. Business Tax 74 80 85 109 97 110 115 120 125 130 4. Amortization and Interest 96 114 119 132 164 167 162 135 133 130 Total Outflow 547 534 598 730 673 663 756 763 780 792 C. Net Flow of Funds (81) 3 178 (241) 157 (146), 690 475 33 (514) == - j Without State Lottery and Thai Tobacco Monopoly. Grants or Loans, depending on government policy, during the forecast period. 3/ As far as committed. Appendix 5 Page 2 of 4 pages Flow of Funds Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 ----------- -------- in Baht million ------------------ State Railway of Thailand (RSR) A. Fund Inflow from Gov't. 1. Transfers 73 40 72 26 90 76 - 2. Loans - - - - - - - _ _ _ Total Inflow 73 40 72 26 90 76 - - - - B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance go Gov't. 12 12 24 23 3 - _ _ _ 3. Bu2iness Tax - - - - - - - - - - 4. AaDrtization and Tnterest 9 9 10 10 11 15 15 15 15 15 Total Outflow 21 21 34 33 14 15 15 15 15 15 C. Net Flow of Funds 52 19 38 (7) 76 61 (15) (15) (15) (15) = - Express Transport Organization (ETO) see Annex 4 Port Authority of Thailand (PAT) A. Fund Inflow from Gov't. 1. Transfers - - - - - 74 - - - - 2. Loans - _ _ _ _ _ _ _ _ - Total Inflow - - - - - 74 - - - - B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. 36 34 29 21 11 3 33 35 35 38 3. Business Tax - - - - - - - - - - 4. Amortization and Interest _ _ _ _ _ _ _ _ _ Total Outflow 36 34 29 21 11 3 33 35 35 38 C. Net Flow of Funds (36) (34) (29) (21) (11) 71 (33) (35) (35) (38) Appendix 5 Page 3 of a pages Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 --- in Baht million -- ------ ---- Telephone Organization of Thailand (TOT) see Annex 4 Fuel Organization (FO) see Annex 4 Metropolitan Water Works Authority (MWWA) see Annex 4 Electricity Generating Authority of Thailand (B3AT) A. Fund Inflow from Gov't. 1. Transfers 27 72 23 19 443 - 533 434 176 _ 2. Loans 149 261 297 235 - - - Total Inflow 176 333 320 254 443 - 533 434 176 _ B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Gov't. 52 - - - - - - - - - 3. Business Tax - - - - _ _ _ _ _ _ 4. Amortization and Interest 54 62 78 90 120 118 116 110 108 105 Total Outflow 106 62 78 90 120 118 116 110 108 105 C. Net Flow of Funds 70 271 242 164 323 (118) 417 324 68 (105) Appendix 5 Pnae ti of 1h pag-es Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 - in Baht million ---- --------- ------= Metropolitan Electricity Authority (MEA) A. Fund Inflow from Gov't. 1. Transfers - - - - - - - - - 2. Loans - - 9 9 _ _ _ _ _ _ Total Inflow - - 9 9 - - - - - B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - - 2. Remittance to Govlt. 47 46 65 83 65 _ _ _ _ _ 3. Business Tax - - - - - _ _ _ _ _ 4. Amortization and Interest 3 12 - - 1 3 3 3 3 3 Total Outflow 50 58 65 83 66 3 3 3 3 3 C. Net Flow of Funds ( (58) (56) (74) (66) ( 3) ( 3) ( 3) 3) ) ( 3) Provincial Electricity Authority (PEA) A. Fund Inflow from Gov't. 1. Transfers 35 43 29 4 - 74 103 89 101 106 2. Loans 20 10 36 _ - - - - - - Total Inflow 55 53 65 4 - 74 103 89 101 106 B. Fund Outflow to Gov't. 1. Corporate Income Tax - - - - - - - - - 2. Remittance to Gov't. - - - - - - - - - - 3. Business Tax _ _ _ _ _ _ _ _ _ _ 4. Amortization and Interest 2 2 3 3 3 3 2 2 2 2 Total Outflow 2 2 3 3 3 3 2 2 2 2 C. Net Flow of Funds 53 51 62 1 (3) 71 101 87 99 104 Other State Enterprises see Annex 4 Appendix 6 Investments (in Baht million) Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 State Railway of Thailand (RSR) 386 276 243 124 414 585 478 645 202 350 Express Transport Organization (ETO) 18 11 16 18 70 20 20 20 20 20 Port Authority of Thailand (PAT) 151 129 52 85 218 169 63 60 70 90 Special Highway Authority (SHA) - - - - - - 19 244 869 1,905 Telephone Organization of Thailand (TOT) 269 309 426 111 290 864 1,043 807 526 461 Fuel Organization (FO) 77 70 60 40 90 102 72 79 50 60 Metropolitan Water Works Authority (MWWA) 108 77 151 167 312 441 962 1,264 1,151 500 Electricity Generating Authority (EGAT) 570 975 978 1,369 2,131 1,808 2,910 3,232 2,902 2,569 Metropolitan Electricity Authority (MEA) 237 276 244 157 370 445 532 522 503 523 Provincial Electricity Authority (PEA) 158 182 196 177 221 166 352 385 405 439 Other State Enterprises 336 174 166 248 241 220 356 388 421 491 TOTAL INVESTMENTS 2,310 2,479 2,532 2,496 4,357 4,820 6,807 7,646 7,119 7,408 Before Revenue Adjustment State Railway of Thailand (RSR) Actual and Forecast Income Statements 1969-1978 Actual Forecast 1/ 17 Fiscal Year Ending September 30 1969- 1970 1971 1972 1973 1974 1975 1976 1977 1978 ------- in Baht million ------------ --------------------- Operating Revenues Passenger 465 479 499 512 532 545 563 578 595 613 Freight 407 427 433 445 426 441 463 478 493 508 Other 45 43 47 45 38 40 40 40 40 40 29/ 21 Total Operating Revenues 917 949 979 1,002 996/ 1,026 1,066 1,096 1,128 1,161 Operating Expenses Salaries and Wages / 424 434 448 455 482 535 562 590 620 651 Materials 237 199 217 215 220 226 228 234 240 250 Fuel V 101 99 104 104 122 150 195 195 195 195 Depreciation g 93 105 113 114 121 128 148 174 190 195 Total Operating Expenses 855 837 882 888 945 1,039 1,133 1,193 1,245 1,291 Operating Income 62 112 97 114 51 (13) (67) (97) (117) (130) Other Income/Expenses (net) 9 11 2 (3) - - - - _ Interest 10/ 23 27 31 34 40 53 82 98 110 120 Net Profit/Loss 48 96 68 77 11 (66) (149) (195) (227) (250) Rate Base (Average Net Fixed Assets in Operation) 5,600 5,833 5,971 6,034 6,183 6,558 6,9.51 7,352 7,593 7,700 Rate of Return 1.1% 1.9% 1.6% 1.9% 0.8% (0.2%) (1.0%) (1.3%) (1.5%) (1.7%) ' to (D Before Revenue Adjustment State Railway of Thailand (RSR) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total ---------------------- in Baht million --------------------------- SOURCES Internal Operating Income 51 (13) (67) (97) (117) (130) (373) Depreciation j 121 128 148 17h 190 195 956 Net Increase/Decrease in Renewal Provision (16) (54) 11 16 16 16 (11) Internal Sources Gross 156 61 92 93 89 81 572 Bonus for Previous Year ( 5) ( 1) - - - - ( 6) Remittance to Government (23) ( 3) - - - - (26) Debt Service: Interest j (40) (53) (82) (98) (110) (120) (503) Amortization / (45) (47) (84) (102) (116) (125) (519) Internal Sources Net 43 (43) (74) (107) (137) (164) (482) External Drawdown of Loans 76 497 308 453 120 250 1,704 TRANSFER OF GOVERNMENT FUNDS 2/ 90 76 193 299 219 264 1,141 TOTAL SOURCES 209 530 427 645 202 350 2,363 APPLICATIONS Investment Expenditures 1/ 414 585 478 645 202 350 2,674 Variations in Working Capital / (205) (55) (51) - - _ (311) TOTAL APPLICATIONS 209 530 427 645 202 350 2,363 15 Percentage of Investment E-Denditures , D Financed by Nt Internal Sources 1 (7%) (15) (17%) (68%) (47%) (18%) D 0 1 IN) Oc rq After Revenue Adjustment State Railway of Thailand (RSR) Actual and Forecast Income Statements 1969-1978 Actual Forecast Fiscal Year Ending September 30 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 - in Baht milTion ----- --------- -------------- Operating Revenues 917 949 979 1,002 996~1 1,0262/ 1,311 1vL,348 1,387 1,430 Operating Expenses Salaries and Wages 5/ 424 434 448 455 482' 535 562 590 620 651 Materials 6/ 237 199 217 215 220 226 228 234 240 250 Fuel j 101 99 104 104 122 150 195 195 195 195 Depreciation 8/ 93 105 113 114 121 128 148 174 190 195 Total Operating Expenses 855 837 882 888 945 1,039 1,133 1,193 1,245 1,291 Operating Income 62 112 97 114 51 (13) 178 155 142 139 Other Income/Expenses (net) 9 11 2 (3) - - - - - Interest 11/ 23 27 31 34 40 53 82 98 110 120 Net Profit/Loss 48 96 68 77 11 (66) 96 57 32 19 Rate Base (Average Net Fixed Assets in Operation) 5,600 5,833 5,971 6,034 6,183 6,558 6,951 7,352 7,593 7,700 Rate of Return 1.1% 1.9% 1.6% 1.9% 0.8% (0.2%)2/2.6% 2.1% 1.9% 1.8% N) CD After Revenue Adjustment State Railway of Thailand (RSR) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total -- ---------- in Baht million--------- ------------------ SOURCES Internal Operating Income 51 (13) 178 155 142 139 652 Depreciation 1 121 128 148 174 190 195 956 Net Increase/Decrease in Renewal Provision-' (16) (54) 11 16 16 16 (11) Internal Sources Gross 156 61 337 v 7 37 1,597 Bonus for Previous Year 3 ( 5) ( 1) - ( 5) (3) (2) (16) Remittance to Government , (23) ( 3) - - _ (26) Debt Service: Interest (40) (53) (82) (98) (110) (120) (503) Amortization (45) (47) (84) (102) (116) (125) (519) Internal Sources Net 43 (43) 171 140 119 103 -3 External Drawdown of Loans 1/ 76 497 308 453 120 250 1,704 TRANSFER OF GOVERNMENT FUNDS 90 76 - - - - 166 GOVERNMENT OR OTHER LOCAL LOANS - - - TOTAL SOURCES 209 530 479 KA 239 353 2,403 APPLICATIONS Investment Expenditures j 414 585 478 645 202 350 2,674 Variations in Working Capital (205) (55) 1 (52) 37 3 (271) TOTAL APPLICATIONS 209 530 479 593 239 353 2,403 Percentage of Investment Expenditures Financed by Net Internal Sources 10% (7%) 36% 22%0 59% 29% 20% CD 11 - Appendix 7 Page 5 of 12 pages State Railway of Thailand (RSR) Notes and Assumptions on "Actual and Forecast Income Statements 1969-1978 j Information obtained from the Yellow Cover Transport Sector Review (September 25, 1972) - Volume ITI/Annexes and Tables - Table 5.3. 2/ 1972 Information Booklet of RSR and discussions with RSR's financial manager. 3/ Appraisal Report No. 64a-TH on the "Fourth Railway Project" (April 5, 1973) - Table 9 and RSR's booklet. 4/ Based on RSR budget figures. 5/ Salaries and Wages Fiscal Year Ending September 30 1972 1973 1974 1975 1976 1977 1978 -- in Baht million ----------------- 1. Salaries and Wages 1972 455 455 455 455 455 455 455 2. Adjustments as mentioned in RSR's letter of December 14, 1973. (a) Basic increase from June 1, 1973 incl. provident fund and income tax. - 9 27 27 27 27 27 (b) Additional increase to earners below $ 4,070 per month - 7 22 22 22 22 22 (c) Increase of kilometrage allowance - 5 13 13 13 13 13 (d) Increase of child allowance - 6 18 18 18 18 18 3. Assumed additional increase of 5% p.a. from 1975 onwards - - - 27 55 85 116 TOTAL 455 482 535 562 590 620 651 6/ Extrapolation taken from Appraisal Report No. 64a-TH. Appendix 7 Page 6 of 12 pages 7/ Fuel Considering that, according to information on the part of the National Energy Authority (NEA), (a) the crude oil price for Thailand was about 140% above the January 1973 price in January 1974 (Us$6.o6 per barrel versus US$2.55 per barrel); (b) a crude oil price of US$11 to US$12 per barrel can be assumed as the long-range price; (c) the rice-oil deal with Saudi Arabia could have the effect of relative price stabilization; (d) the refinery cost is unaffected by the oil increase; and (e) experience shows that governments tend to increase the price of diesel less than of other oil products due to the immediate adverse effect on vital sectors of the economy (the recent diesel price increase was only about 13% versus about 30% for gasoline and about 70% for Bunker '0" oil). an increase of 80% only has been assumed from 1975 onwards. The positive effect expected from the dieselization program after 1974 (Table 9 of Appraisal Report No. 64a-TH) has been disregarded. 8/ Assumptions of Appraisal Report No. 64a-TH. 21 Assumptions of Appraisal Report No. 64a-TH. 10/ Assumptions of Appraisal Report No. 64a-TH. l/ Figures are unchanged since additional local loans are not required with the increased tariffs (see page 4 of Annex 7). 12/ According to RSR's letter of December 14, 1973 to the Bank, tariffs cannot be adjusted in FY 1974 so as to comply with the 2% rate of return covenant of Loan 898-TH. L/ Overall 24% tariff increase effective October 1, 1974 so as to comply largely with the 2% rate of return covenant. Appendix 7 Page 7 of 12 pages State Railway of Thailand (RSR) Notes and Assumptions on "Forecast Sources and Applications of Funds 1973-1978" 1/ Assunptions of Appraisal Report No. 64a-TH. j Assumed as grants since loans would aggravate the financial situation through additional debt service. The bonus payments of about 5% of the net profit should actually increase the "Salaries and Wages" of the Income Statements "AFTER TARIFF ADJUSTMENT". Due to their insignificant effect on the financial results, however, they have been disregarded. 4/ Considering the service a railroad system provides to the working and low income classes, RSR should be exempt from remitting part of the income to the government. This exemption has been assumed in the financial projections. Annend:x 7 Pi,e Q3 of 12 ' raeS State Railway of Thailand (RSR) Long-Term Borrowings as of September 30, 1973 Year of Amount Lending Organization Incurrence Term Interest Loan Amount Withdrawn A. FOREIGN IBRD 280-TH 1961 20 years 3 years of grace 5.75% US$14,600,ooo US$14,497,427 898-TH 1973 20 years 7.25% US$15,000,000 about 3 years of grace USAID 1961 US$1,904,137 US$1,896,290 Kreditanstalt fuer Wiederaufbu; 1968 10 years-about 2 years of grace 6.0% DM 19,731,257 DM 19,603,970 German Federal 1968 20 years-about Republic 10 years of grace 3.5% DM 9,100,000 DM 9,100,000 Exim Bank of 1969 15 years-about Japan 5 years of grace 5.75% Y 2,835,885,754 Y 2,829,631,211 Banque Francaise 1973 about 10 years 7.23% F.F.74,000,000 du Commerce French Government 1973 about 10 years 3.5% F.F.60,000,000 F.F.13,399,668 Kreditanstalt fuer Wiederaufbau (through Government 1962 18 years-about of Thailand) 5 years of grace 4.5% DM 45,000,000 DM 44,992,365 B. LOCAL Ministry of Finance 1963 18 years-about 3 years of grace 5.75% $ 155,000,000 , 155,000,000 / A2pendix 7 Page 9 of 12 npges State Railways of Thailand (RSR) SUNMMARY of the RSR-Act 1951, as amended 1959 and 1966 Ministry in Charge: Ministry of Communications Tities and Powers : 1. Construction, purchase, acquisition, sale,hire and lease of assets, properties, equipment and facilities necessary to operate a railway system; 2. to carry by rail passengers, goods, merchandise, money, etc; 3. to issue regulations on railway safety measures; 4. to borrow money; 5. to determine rates of charge for services provided (apart from certain modifications within limits, tariff changes have to be approved by the Council of Ministers - see also paragraphs on tariffs); and 6. to operate hotel and restaurant services. Initial Capital: 1. Assets less liabilities transferred from the former Railway Department; and 2. certain budget appropriations set aside in the year of above asset transfer. Taxes: RSR is exenpt from taxes under the Revenue Code (in effect corporate income tax and business tax). Supervision, Control and Management General Supervision: Minister of Communications. He has the power to stop any action on the part of RSR which is inconsistent with the policy of the government. Any matter which has to be submitted to the Council of Ministers has to be charnelled through him. Appendix 7 Page 10 of 12 pa.ges Board of Commissioners: 1 6 members ) appointed by the Council of Ministers The board appoints the general manager who is ex-officio member. Approval of the Council of Ministers has to be sought before: 1. construction of new railway lines; 2. abandonment of lines under construction or in operation; 3. increasing or decreasing capital; 4. borrowing money; 5. sale of immovable property; 6. fixing standard rates of charge for services;and 7. changing tariffs to levels below 50% and above 25% of the standard rate. Budget: The annual investment budget has to be submitted to the Council of Ministers for approval. It has to be accompanied by the operational budget for information. Remittance to Government: The annual surplus (revenues after deduction of operating expenses and allowance for various reserves) has to be transferred to the government. Should revenues be insufficient to cover operating expenses, the government has to cover the deficit. Appendix 7 Page 11 of 12 pages State Railway of Thailand (RSR) Tariffs and Fares 1. Passenger Fares (i) Ordinary passenger fares are computed under the following three-stage system, whereby the fares for each stage of tapered distances are added together according to the distance involved: Distance Travelled l.Class 2.Class 3.Class -______- per Ilk ---------- 1 - 250 km 40 stang 20 stang 10 stang 251 - 500 km 36 " 18 It 9 it 501 and over 32 I 16 " 8 " Special Zones 1/ 24 It 12 tl 6 " 1/ Cheap fare zones on all lines within the 150 km radius of Bangkok. (ii) The ratio between the first, second and third class are 4:2:1. Children under 12 years of age are charged half-fare, under the age of three they travel free. Reduction on round-trip tickets is 30% (l.class), 20Q% (2.class) and 10% (3,oIas-). A 50% reduction is granted to most religious orders, serricemen and students. 2. Freight Rates (i) Freight traffic is classified as follows: (a) carload (CL) (b) less-than-carload (LCL) (c) livestock (ii) Freights are classified into 10 classes of rates and cover approximately 330 major items. Appendix 7 Page 12 of 12 Pages State Railway of Thailand (RSR) General Observations RSR's basic passenger and freight rates have not changed since 1955. As mentioned in Bank transport sector reviews, the tariff structure is antiquated, highly complex and unsuited to meet the competitive challenge of today's transport industry. The structure, for instance, does not take into account the marginal costs in peak and off-peak operation and main and back-haul operation. The rates also seem to cause a great deal of cross- subsidization. The biggest anomaly is the highly subsidized passenger tariff in the greater Bangkok area. RSR is exempt from all revenue taxes, from the business tax and the stamp duty. It is not exempt from customs duties and has to pay the full price (including taxes) for fuel. As shown earlier in this annex, RSR's financial position is likely to change rapidly for the worse unless decisive action on the revenue side is taken soon. Revenue adjustments of the order of 24% are estimated to be required to ensure reasonable financial results in future and to enable RSPR to make the 2% rate of return on average net fixed assets in operation required in the Bank documents. This assumes continuation of income tax exem=tion and, in addition, exemption from remittance to the govenument. The overall tariff adjustment of 2L9 appears large; however, thi. means available to RSR to achieve it are quite varied. For instance, Appraisal Report No. 64a-TH estimates that, if the Bangkok area fares were to be increased to the general level, uhere would be an increase in revenues of 0 50 million per year. Average receipts per freight ton-kl, 15 stang (US/0.75), is low and should be capable of considerable improvement without loss of traffic. Average revenues per pass-km (12 stang - equivalent USg0.6) are also low. In addition, the minimum charge for parcel traffic is extremely low at / I. An increase of this mirnmLm charge to 0 10 coupled with raising of the lowest rates for LCL traffic would be easily feasible and prodace an estimated $ 20 million annually. Appendix 6 Pmace 1 of 3 p>Ges Express Transport Organization (ETO) Actual and Forecast Income Statements 1969-1978 Fiscal Year Ending Actual Forecast September 30 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 ------------------------ in Baht million -------------------------- Operating Revenues 445 456 494 504 544 587 635 685 740 800 Operating Expenses Depreciation 7 9 9 11 13 16 18 20 23 25 All other expenses 405 404 442 452 497 540 578 630 680 748 Total Expenses 412 413 451 463 510 556 596 650 703 773 Profit/Loss 33 43 43 41 34 31 39 35 37 27 Remittance to Government - - 21 13 1 0 9 12 11 11 8 Bonus - - 4 4 2 1 2 2 2 1 Net Profit 33 43 18 24 22 21 25 22 24 18 a. No variation considering corporate income tax has been assumed since the remittance to government is equivalent to such tax. b. Designing of a Forecast Sources and Applications of Funds Statement is not required since ETO finances all its investments from internal cash generation. It has not borrowed funds and, as a consequence, its capital consists entirely of equity. Appendix 8 Page 2 of 3 papmes Express Transport Organization (ETO) SUMMARY of the 1953 ETO-Act Ministry in Charge: Ministry of Commnications Duties: 1. Transportation of passengers, goods and parcels in and outside Thailand; 2. activities relating to transportation of persons, goods and parcels (for instance temporary storage); and 3. any commercial or industrial activity beneficial to the economy. Capital: Baht 50 million, Baht 10 million of which have been paid in initially by the government; additional amounts have been and will be paid as and when required (at the end of FY 1972 the paid-in amount was $ 43.6 million). Supervision, Control and Management The Minister of Commnications exercises general supervision of ETO. In case ETO's Board disagrees with the minister, the problem creating disagreement has to be submitted to the Council of Ministers through him. The Minister appoints and removes ETO's President (General Manager) with the approval of the Council of Ministers. Board of Directors: 3 CDirectors) appointment and removal through Council of Ministers President ex-officio The Board establishes the company's general policy and exercises normal supervision. Among other specific matters, ETO's Board is free to determine transport charges, charges for services and charges for the use of various of its facilities. This power can be entrusted to the President at the Board's discretion. Appendix 8 Page 3 of 3 pages Express Transport Organization (ETO) General Observations ETO's main responsibility is carrying freight in competition with several private trucking firms and, to a certain extent, with RSR. For this purpose it operates the largest trucking fleet in the country (about 30%). It also operates some bus lines in Bangkok. For special purposes it uses the services of RSR. It handles about 20/; of Thailand's normal cargo, about 35% if the American military cargo is included. The majority of its activity is in Bangkok (about 50%); due to the political and economical structure of the country the remaining traffic runs from and to Bangkok. By resolution of the Council of Ministers, ETO has the exclusive right of trucking into and from the port of Bangkok and all railway stations throughout the country. In practice, however, only the Port Authority supervises this rule; concerning traffic to and from railway stations it is frequently not observed. Furthermore, ETO has the monopoly for shipping transit freight to Laos and the Khmner Republic. It has the exclusive right of transporting cargo for the American military forces in Thailand. According to a resolution of the Council of Ministers, all government cargo should be transported by ETO; ETO, however, has information that a number of government departments ask for quotations and award the contract to the lowest bidder. As all state enterprises, ETO has to approach the Fuel Organization first for its diesel and gasoline purchases. It has to pay the full fuel price including taxes. Taxes Up to November 1973 a transport tax of 0.05% was levied; this tax has been abolished for domestic traffic. ETO is exexrpt from corporate income tax and business tax. Instead, the government imposes the profit remittance which in the past has been equivalent to the corporate income tax. ETO is not exempt from customs duties. Port Authority of Thailand (PAT) Actual and Forecast Income Statements 1969-1978 Actual Forecast Year Ending September 30 1969 1970 1971 1972 1973 1974 197 1976 1977 1975 ------------- ------------ - -- in Baht million ---- - --------------------- A. BEFORE REVENUE ADJUSTMENTS Operating Revenues 269 272 269 262 256 270 275 290 305 320 Operating Expenses Various Expenses 144 156 169 174 190 205 212 232 249 265 Depreciation 26 31 39 45 47 52 56 56 56 56 Corporate Income Tax - - - - - - _ - - - Total Operating Expenses 170 17 2-08 219 237 307-6$ -3 7 321 Operating Income 99 85 61 43 19 13 7 2 - ( 1) Interest 1 - 2 5 10 15 18 18 16 15 Profit/Loss 98 85 59- 8 _L(2 (11) (16) (16 6) Rate of Return 7t7% 7..979 2 .4% Th, Td - _ B. AFTER REVENUE ADJUSTMENTS Operating Revenues 269 272 269 262 256 270 397 421 439 461 Operating Expenses Various Expenses 144 156 169 174 190 205 212 232 249 265 Depreciation 26 31 39 45 47 52 56 56 56 56 Corporate Income Tax - - - _ - - 33 35 35 38 Total Operating Expenses 170 -157 2 0 219 237 27- 301 323 30 39 Operating Income 99 85 61 43 19 13 96 98 99 102 Interest 1 - 2 5 10 15 18 18 16 15 Profit/Loss 98 85 59 8 2 78 80 83 -.I Rate of Return ffm 1l. 9r T 78 80 8T 81_ Rate Base (Average Net Fixed Assets in Operation) 461 536 643 670 811 960 1,200 1,220 1,240 1,260 A W- ~D ,O Before Revenue Adjustment Port Authority of Thailand (PAT) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total ------------in Baht million----------- SOURCES Internal. Operating Income 19 13 7 2 - (1) 40 Depreciation 47 52 56 56 56 56 323 Internal Sources Gross § 3 -3 63 Bonus for Previous Year (2) - - - - - (2) Remittance to Government (11) (3) - _ (14) Debt Service (12) (27) (31) (31) (31) (31) (163) Internal Sources Net 41 3 32 27 25 2 External IBRD-Loan 702-TH 104 80 12 - - - 196 TRANSFER OF GOVERNMENT FUNDS - 74 29 43 50 71 267 Total Sources 1445 189 73 70 75 95 647 APPLICATIONS Investment Expenditures 218 169 63 60 70 90 670 Variations in Working Capital (73) 20 10 10 5 5 (23) Total Applications 145 189 73 70 75 95 647 Ft N 1W oX 0) After Revenue Adjustment Port Authority of Thailand (PAT) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total -------------------- in Baht million - SOURCES Internal Operating Income 19 13 96 98 99 102 427 Depreciation 47 52 56 56 56 56 323 Internal Sources Gross 7 m m 7 :gs 70- Bonus for Previous Year ( 2) - - - - - ( 2) Remittance to Government (11) ( 3) - - - - (14) Debt Service (12) (27) (31) (31) (31) (31) (163) Internal Sources Net 4121 123 123 12 7 5T7 External IBRD-Loan 702-TH 104 80 12 - 196 TRANSFER OF GOVERNMENT FUNDS - 74 - - - - 74 Total Sources 145 189 133 123 124 127 841 APPLICATIONS Investment Ezpenditures 218 169 63 60 70 90 670 Variations in Working Capital (73) 20 70 63 54 37 171 Total Applications 145 189 133 123 124 127 841 (MD lCD ,tC (D v Appendix 9 Page 2 of 4 pages Port Authority of Thailand (PAT) Notes and Assumptions on the Financial Data 1969-1978 Basically, the financial projections have been taken from NESDB's summary on "state enterprise financial data". The results, however, were compared with the 1972 yellow cover transport sector report and, finally, discussed with PAT Is general manager. Due to rising costs PAT's financial situation is likely to deteriorate in the near future. A 459 overall tariff increase has therefore been assumed effective October 1, 1975 which is designed to generate the 8% rate of return on average net fixed assets in operation as required in the Loan 702-TH documents. Starting FY 1975 it has been assumed that PAT will be liable to paying corporate income tax. Appendix 9 P,eR5 nff nqaes Port Authority of Thailand (PAT) Principal Rates and Charges A. Charges Against Shipowners or Ships' Agents 1. Channel Dues (inward passage only) Vessels of less than 500 net reg. tons Nil Vessels of 500 to 1500 net reg. tons $ 1 per ton Vessels exceeding 1500 net reg. tons $ 2 per ton 2. Wharf Rates $ 1 per vessel net reg. ton for each call not exceeding 72 hours, plus 25% for every subsequent 24 hours or fraction thereof. % 500 per light- er per call. 3. Buoyage $ 100 per buoy per 24 hours or fraction thereof. $ 200 service charge per mooring, unmooring of a ship. B. Charges Against Consignees 4. Inward Cargo Landing Charges Class 1 $ 14 per metric ton - most general cargo Class 2 $ 18 per metric ton - beer, wines, spirits, tobacco, oils, dyes, china, textiles, etc. Class 3 $ 22 per metric ton - dangerous and poisonous goods, chemicals, furniture, cement, ores and metals, etc. Class 4 $ 30 per metric ton - vehicles, etc. 5. Inward Cargo Handling Charges Class 1 $ 30 per metric ton - most general cargo Class 2 $ 40 per metric ton - machinery, cement, chemicals, etc. 6. Outward Cargo Quay Dues Class 1 $ 1 per metric ton - most general cargo Class 2 $ 1.25 per metric ton - timber, gold and silver. 7. Outward Cargo Handling Charges Half rate of charges listed in 5 above. 8. Storage Charges Holding of cargo in transit sheds is free for the first 72 hours after completing a vessel's discharge. Thereafter charges range from $ 4 per ton per day during the first week to $ 12 per ton per day during the ninth and subsequent weeks. Appendix 9 Pages 6 of 6 pages Port Authority of Thailand (PAT) General Observations The Port Authority of Thailand (PAT) was established by Act in 1951 (as amended in 1956, 1959 and 1973). It reports to the ministry of communications. PAT's responsibility is to operate the Port of Bangkok which consists mainly of the Klong Kloi wharves and wharves in other areas along the Chao Phya river near Bangkok. The port can only be reached through a narrow and winding navigation channel. PAT is in charge of dredging and maintaining the channel. PAT's present tariffs were introduced in 1969. Their principal features are attached to this annex. PAT's management submits to the Council of Ministers for approval the scale of port charges which, for some of the dues and tariffs, permit variation within a certain range. This range can be rather wide, in certain cases up to 400% of the basic tariff. For application of the tariff variations PAT need not ask governnent permission. The port of Bangkok handles predominantly imports. In December 1973, on an average 140,000 tons of cargo were stored on land and 100,000 tons were on vessels awaiting unloading. During the same period only about 5,000 tons of cargo (mainly cloth, dyes and handcraft) were exported. The bulk of exports from the Bangkok area is done through private facilities along the Chao Phya river. Taxes and Customs Duties PAT is exenpt by its Act from corporate income tax and business tax; it is also exenpt from customs duties. It has to pay the normal fuel price including taxes. Appendix 10 P2o.e I of 1 page Special H ighway Authority (SEA) The Special Highway Authority (SHA) was set up by decree in 1973 as a consequence of the government's desire to create an institution capable of coordinating the various problems concerning transportation and traffic aspects in the country. In effect, however, SHA is presently in charge of: (a) constructing and, later,operating a future network of super highways throughout Thailand; and (b) constructing and operating the future expressway and rapid transit systems in Bangkok. At present, SHA is in the process of establishing itself, hiring personnel, etc.\ In th4-- = 4t d-4 'e4er jiAll haobn 14P4oq lcto AHJ onl rooue il o oi,dfrmooloto of-highway e-l -O4,e-ll-_ highway ½ n with ihe A team of German consultants has studied the traffic situation in the Bangkok area and is expected to submit the final report around May 1974. Tentative conclusions reached by this team recommend the following investments for the first stage of an expressway system and a rapid transit system in Bangkok: 1974 1975 1976 1977 1978 Tin Baht million) Expressway 13 217 650 640 140 Rapid Transit 6 27 219 1,265 1,367 Total Construction Expenditures 19 244 869 1,905 1,507 This program, for which partial financing from the Bank is contemplated, appears to be rather ambitious, particularly as far as the time schedule is concerned. For the purpose of this report, therefore, the mission postponed all construction expenditures by one year. 1974 1975 1976 1977 1978 (in Baht million) Total Construction Expenditures - 19 244 869 1,905 Apoendix 11 Pv'e 1 of 13 r),;es Telephone Organization of Thailand (TOT) Actual and Forecast Income Statements 1969-1978 -/ Actual Forecast Year Ending September 30 1969 1970 1971 1972 1973 1974 1975 1976 1977 1997_ i---- in Baht million ------------------------ Operating Revenues J 248 313 390 481 501 567 672 778 869 994 Operating Expenses Other Operating Expense - 114 137 190 221 230 268 315 365 384 431 Depreciation 56 70 80 116 140 145 166 206 256 300 Total Operating Expenses 170 207 270 337 370 413 481 571 640 731 Operating Income 78 106 120 144 131 154 191 207 229 263 Other Income 7 7 7 5 5 2 - - - Interest 6 5 5 12 34 37 40 56 125 148 Net Profit/Loss 79 108 122 137 102 119 151 151 104 115 Rate Base (Average Net Fixed Assets in Operation) 767 927 1,085 1,454 1,726 1,678 1,864 2,346 2,949 3,402 Rate of Return 3/ 10.1 11.4% 11.1% 9.9% 7.6% 9.2%5 10.2% 8.8% 7.8% 7.7 .4ppendix -LI Page 2 of 13 pages Telephone Organization of Thailand (TOT) Forecast Sources and Applications of Funds 1973-1978 1973 1974 1975 1976 1977 1978 SOURCES -- in Baht million ----------- Internal Operating and Other Income 191 220 272 300 329 377 Depreciation 140 145 166 206 256 300 Internal Sources Gross 331 Q77 - TO 7 7 7T Less: Bonus for Previous Year 11 8 9 12 12 8 Remittance to Government 63 47 55 70 48 53 Debt Service: Amortization 27 37 47 27 48 63 Interest 36 57 102 143 160 163 Internal Sources Net 19 227 317 390 External Subscriber Deposit 21 29 53 52 49 65 Borrowings Japan Exim-Bank 22 15 - - - _ IBRD-Loan 18 164 273 203 96 15 Suippliers' Credits 18 141 210 228 65 65 GOVERNMENT OR OTHER LOCAL LOANS - 125 325 50 - - Total Borrowings 58 445 808 481 161 80 Total Sources 273 690 1 787 527 535 APPLICATIONS Investment Expenditures 290 864 1,043 807 526 461 - Variations in Cash and Working Capital (17) (174) 43 (20) 1 74 Total Applications 273 690 1 086 787 527 535 Appendix 11 Page 3 of 13 pages Telephone Organization of Thailand (TOT) Notes and Assumptions on Financial Data 1969-1978 1/ The actual figures 1969-1971 have been taken from Appraisal Report No. PU-99a, dated October 27, 1972. The actual 1972 results as well as the financial projections were provided by TOT. They include a recent review of the investment program and take into account TOT's present ideas on the future development of costs and revenues. 2/ From mid-1974 onward the new and simplified tariff (explained later in this annex) has been applied. 3/ In future, the 10% rate of return as required by Bank documents is unlikely to be achieved in each year without tariff adjustments. However, since TOT's financial standing does not appear to be seriously affected by the lower return, no future tariff increases have been assumed. 4/ Includes bonus payments to TOT's staff and remittance to the government equivalent to the corporate income tax (3c% of profit). 5/ The investment expenditures as prepared for the mission included only the presently ongoing investment program plus some routine expenditures. This was done because no decision has been made yet on a later investment program. Consequently, the 1977 and 1978 investments were unreasonably low. In order to raise investments to more reasonable levels, the mission increased the annual investments by X 200 million in 1977 and 0 300 million in 1978. Telephone Organization of Thailand (TOT) Long-Term Borrowings as of September 30, 1973 Term Contract Sources of Loans Amount of Loans Interest Year Grace Period Signed 1. Ministry of Finance ; 123,500,000 8% 8 - Nov. 20, 1964 2. Export-Import Bank of Japan Y 4,504,341,467 5.75% 18 5 March 14, 1969 3. Export-Import Bank of Japan Y 792,000,000 5.75%, 18 5 Sept. 29, 1971 4. Bell Telephone Manufacturing Company S.A. (Supplier Credit) B.F. 17612752384 6% 10 - May 23, 1969 5. International Bank for Reconstruction and Development $ 37,000,000 7.25%, 20 4 Dec. 5, 1972 6. Export-Import Bank of Japan Y 1,820,524,730 5% 20 7 April 2, 1973 0 F> w(DA 42H o fS~ owi Appendix 11 Page 5 of-13 pages Telephone Organization of Thailand (TOT) Summary of the Telephone Organization of Thailand Act B.E. 2497 (195h) (as amended by Decree B.E. 2511 (1968) Ministry in Charge: Ministry of Communications Duties: 1. Providing all services in connection with telephone business in the matter of telephone apparatus, accessories and instruments and service materials; 2. fixing the rates of charges for hiring and for any other undertakings or for services rendered in connection with telephone business; 3. loan, borrow, overdraw money from banks,issue bank notes or other instruments for investment. Capital: 1. Initial Fund (budgetary expenditures and extraordinary investment expenditures for budget year 1954 of the telephone division of the Post and Telegraph Department and any other budgetary grant allotted by the Government to that division); 2. transferred funds, property, assets from the telephone division; 3. funds recelved from the Governmernt budget at a later date; and 4. other funds or properties assigned from Government, state enterprises, foreign governrents or Internal Organizations. Taxes: The Telephone Organization is exempted from the payment of taxes and duties under the revenue code. Supervision, Control and Management General Supervision: Minister of Communications. Matters to be submitted *to the Council of Ministers under the TOT-Act shall be channelled through him. TOT-Board of Directors 1 chairman ) Appointment and removal through the Council of Ministers h-6 directors ) The Board appoints the MANAGING DIRECTOR (chief executive) for an indefinite period subject to approval by the Council of Ministers. Appendix 11 Page 6 of 13 pages The Council of Ministers' approval has to be sought before: 1. stopping the use of a telephone connection or long-distance telephone; 2. increasing or redlcing capital investments; 3. contracting or borrowing amounts exceeding 3 million Baht in each case; 4. disposing of immovable property; and 5. setting tariffs for the hiring of telephones or for other services. Budget: The annual investment budget has to be submitted to the Council of Ministers' approval, the operating budget for information. Remittance to the Government: The annual revenues after deducting all costs and allowing for special and investment reserves shall be remitted to the Government. Should revenues be insufficient and funds for covering the resulting deficit not available, the Government has to provide the necessary funds. Appendix 11 Page 7 of 13 pages TELEPHONE ORGANIZATION OF THAILAND (TOT) Summary of Presently Applicable Tariffs Local Tariffs Tariff on Regular Telephone, Automatic Types, within Bangkok and Thon Buri Exchange Area No. Details Rate Remarks 1 Residential telephone not partici- 50 baht/month First 50 calls free pating in commercial activities, 1 baht additional for one line per call above the 50th. 2 For Government organization, State 50 baht/month First 50 calls free enterprise, (or)offices not. partici- 1 baht per call from pating in commercial activities, the 51st to the 200th. daily newspaper office, member 75 satang per call of House of Representatives, above the 200th. educational institution? opera- ting on the same syllabus of the YMinistry of Education, for one line 3. For State enterprise, commer- 200 baht/month First 200 calls free. cial firm, society, (or)office 75 satang per call participating in commercial above the 200th. activities and others except- ing those in 1 and 2 above, for one line l4. Public Telephone 75 satang per call For new installation, if the time of use for the first month is less than 15 days, the rent for that month shall be half the regular rates. (According to Regulation Number 31(1) effective on September 25, 1962.) jppendix 11 PgWof 13 pages Tariff on Regular Telephone, Automatic Type in Provincial Exchanges shall be as follows: No. Details Rate Remarks 1 Regular telephone, automatic 50 baht/month First 50 calls free. type, with line not more than 1 baht per call above 10 kilometers, for one line the 50th. 2 Regular telephone, automatic type 50 baht/month First 25 calls free. with line more than 10, but less 1 baht per call above than 20 kilometers, for one line the 25th. 3 Public Telephone 75 satang per call Other Service Charges 1. Telephone Subscribers' Deposit. Formerly 500 baht per line was collected. From January 1, 1968, it is collected as per the following conditions: (a) New subscriber 1,500 baht per line; (b) Old subscriber who wishes to move, transfer or change to a new place, an additional 1,000 baht will be collected, making a total deposit of 1,500 baht. (According to Administrative Regulation Nui-ber 34 effective January 1, 1968.) 2. The transfer of the rights of using telephone shall be under the following conditions: (a) Residence 1) Debt must be cleared first by transferee. 2) Transferee must pay a transferring fee per line namely: a) Transfer from other, 1,000 baht; b) Transfer to member of the family, husband, wife, father, mother, son and daughter, 100 baht. Appendix 11 Page 9 of 13 pages (b) Government agencies and enterprises: 1) For telephone installed at the residence of officials of Government agencies or enterprises, telephone charges are paid by the Government agencies or enterprises concerned. When the official leaves Government service, if such person or member of the family, that is spouse, parent, son or daughter wishes to continue using the telephone at the same place with the approval of the Government agency or enterprise concerned, transferring fee of 100 baht must be paid. 2) No transferring fee is necessary for transfer between Government agencies. 3) Transfer of telephone to Government agencies from other, the transferring fee of 100 baht must be paid. Diplomatic circle including foreign institution with the purpose of aiding Thailand, the transfer of telephone is prohibited and telephone set must be taken back. (According to Regulation Number 37(1) effective on November 4, 1963,) 3. (a) The charge for changing a new telephone when the telephone in use is not defective shall be 50 baht per instrument. (b) Change of telephone number shall be charged 50 baht each. (c) The temporary rental of telephone for use in entertainment or fairs shall be made only by special arrangement with the Telephone Organization for settlement of details. (According to Regulation Number 8 issued on June 14, 1954.) Long Listance Tariffs Regulation Number 41 On the Revision of Telephone Service Charge of the Telephone Organization of Thailand By virtue of the power conferred in Sections 31(h) and ho(5) of the Telephone Organization of Thailand Act, B. E. 2497, and with the approval of the Council of Ministers, the Board of Directors deems it expedient to issue the Regulation on the revision of telephone service charges as follows: Appendix 11 Page 10 of 13 pages (1) Call-rate for Long-Distance Telephone Service attached to Regulation Nhumber 31(5) shall hereby be cancelled and replaced by the following: (a) Call-Rate for Long-Distance Telephone Service (HF-High Frequency) Not exceeding Per one Distance first 3 minutes additional minute (Baht) Not exceeding 50 kilometers 5.00 1.00 Ecceeding 50 kms. up to 100 kms. 7.00 2.00 Exceeding 100 kms. up to 250 kms. 12.00 4.oO Exceeding 250 kms. up to 500 kms. 15,00 5.00 Exceeding 500 kms. 25.00 8.00 Remarks: Fraction of minute is counted as one minute. (b) Call-Rate for Long-Distance Telephone Service on other system. (Basic. rate) First 3 minutes Per one (One unit call) additional minute Distance Not exceeding - baht (baht) 0 - 25 kms. 3.00 1.00 25 - 50 kms. 6.oo 2.00 50 - 75 kms. 9.00 3.00 75 - 125 kms. 12.00 4.00 125 - 200 kms. 15.00 5.00 200 - 350 kms. 18.00 6.oo 350 - 600 kms. 24.00 8.oo 600 - 900 kms. 30.00 10.00 Exceeding 900 kms. 36.oo 12.00 Remarks: Basic rate refers to long-distance telephone ordinary calls or station-to-station calls. Each long-distance telephone call, is not exceed- ing 3 minutes, shall be considered as 1 call unit (3 minutes) charge. Tf exceeding 3 minutes, additional minute charge is applied. Fraction of minute is counted as one minute. Appendix 11 Fage 11 of 13 pages (2) The Telephone Organization of Thailand shall designate area where the ships can contact individual on shores, regardless of the position of the ship which may be at sea or at the pier. The basic charge for such service not exceeding first 3 minute is 18 baht per call. The rate of 6 baht is applied for an additional minute. If the speaker wishes to make a call outside the designated area, an additional service charge according to the basic rate for long-distance call in paragraph 1 (b) shall apply. (3) The Telephone Organization of Thailand shall designate extended area. The charge for such extended area shall be not exceeding 2 baht per call. (h) The basic rate for long-distance telephone service in para. l(b) shall be applied in the case of Ordinary Calls or Station-to-Station Calls. (5) Person-to-Person Calls. If the desired party is not available for the contact, there will be no charge. When the contact with the desired person can be made, there shall be an addition of one minute charge to the basic rate. (6) Urgent Calls (long-distance calls) refer to the calls which can be made immediately, regardless of the priority of others with the exception of Fixed Time Calls in para. 7. This charge for urgent calls is twice as high as the basic rate for normal calls. (7) Fixed Time Calls refer to the fixing of time for making a call in advance according to the wish of the subscriber. The charge for such fixed calls is three times as high as the basic rate of normal calls. (8) Night calls refer to the call from 19.00 hours to 6.00 hours of the following day. A service charge is half of the basic rate. (9) Return charges refer to the collection of money from terminal receiver. An additional service charge of one baht in addition to the charge for long-distance telephone call is counted. (10) Rental of Telephone Channels refers to renting direct telephone line with a single user each at the original point and at the point of desti- nation . Appendix 11 Page 12 of 13 pages Telephone Organization of Thailand (TOT) Proposed Telephone Tariff 1. Local telephone tariff for the whole Kingdom I Fixed Charge No. per line Rate [ 1 i All kinds of subscribers 30 baht/month 1 baht/call 2. Long-distance telephone tariff (Basic rate for periodic pulse metering system) No. Distance (kilometers) Time (Second) Service DaV rate Night rate Charge 1. Not-exceeding 100 kms 30 60 1 baht 2. Exceeding 101 kms. up to 200 kms. 15 30 1 " 3. 201 300 12 24 1 4. " 301 " ""500 "9 18 1 it 5. Exceeding 500 kms. 7.5 15 1 Remarks - Each long-distance telephone call charge 1 baht/unit. - The tariff rate for long-distance telephone service will take effect when subscriber trunk dialling (STD) service is introduced. Above data cover only part of TOT's proposed tariff; additional parts of the tariff schedule are still under study. The total schedule will be submitted to the Government for approval. Appendix 11 Page 13 of 13 pages Telephone Organization of Thailand (TOT) General Observations TOT is responsible for all local and long-distance telephone traffic within the boundaries of Thailand. The responsibility of providing long-distance telephone service abroad rests with the Post and Telegraph Department of the Ministry of Communications, which, as the name suggests, is not a state enterprise. Although this division of responsibilities does not appear to create organizational difficulties, the mission would think it desirable to have one entity only responsible for the whole telephone service. TOT's tariff structure is presently under review. Changes to be introduced aim at simplifying the tariff structure, allowing for future subscriber trunk dialling (STD) and attempting to introduce a uniform tariff for all subscribers with similar consumption characteristics. Part of TOT's proposed new tariff, which is subject to approval by the government, is given earlier in this annex. The second part, mainly dealing with tariffs applicable to government agencies, is presently being worked out. According to an understanding between TOT and the Bank the new tariff must yield revenues at least equivalent to the present tariff. The financial projections show that TOT is unlikely to generate in future consistently the 1O rate of return required under Loan 864-TH. However, since TOT's financial standing does not appear to be seriously affected by the lower return, no future tariff adjustment has been assumed. Taxes TOT is exempt from paying corporate income tax,business tax and stamp duty. It is not exempt from customs duties. It has to pay the usual remittance to the government which in the past was assessed equivalent to the applicable corporate income tax. Appendix 12 Page lof5_ave Fuel Organization (FO) The information obtained from FO does not have the accuracy and completeness of other state enterprises dealt with in detail in this report. This is because FO claims that a number of the questions raised by the mission touched on "security aspects" and the answers were "classified". The following statements therefore have largely been worked out on the basis of discussions held with officials of FO or are based on sporadic data obtained from NESDB. Comprehensive written information on financial results could not be obtained. Actual and Forecast Income Statements 1969-1978 Actual Forecast 1969 1970 1971 1972 1973 1974 1975 1976 1977 1975 - -- in Baht million ------ - --------------- Operating Revenues Sales of Petroleum 1,352 1,378 1,533 1,992 1,207 3,581- 4,563= 4,791 4,896-/5,141l Products Operating Expenses Purchase of ProductsS/ 1,731 1,980 3,295 43198 4,408 4,504 4,730 Operation, Maintenance, etc. 97 102 107 112 118 124 130 Depreciation 32 35 41 41 40 39 38 Total Operating 1,222 1,246 1,407 1,860 2,117 3,443 4,351 4,566 4,667 4,898 Expenses Operating Income 130 132 126 132 90 138 212 225 229 243 Interest - - - - - - - - - - Bonus (10%) 13 13 13 13 9 14 21 23 23 24 Remittance to Gov't. 65 65 32 66 45 69 106 113 115 122 Net Profit 72 3 TF r9 9T1 97 1/ Based on US$9.86 per barrel for crude oil. 2/ Assuming an increase to US$12 per barrel for crude oil and 5% annual increase in quantity. S/ Based on past experience - roughly 90% of sales. No Forecast Sources and Applications of Funds Statement has been made since FO finances all its investments from internal cash generation. There is no long-term borrowing. Appendix 12 Page 2 of 5 pages Fuel Organization (FO) Summary of the FO-Act 1960 Ministry in Charge: Ministry of Defense Objectives, Duties and Powers: l. to serve the public in providing fuel, oil and petroleum products; and 2. to engage in trading and other business required to implement the objective spelled out in paragraph 1. In order to fulfill above objectives, the organization has the power to: 1. own or rent land and other property within or outside Thailand; 2. trade in products or materials ancillary to fuel oil; 3. borrow and lend funds up to Baht 5 million. In excess of Baht 5 million prior approval of the Council of Ministers has to be obtained; 4. enter into partnership with other persons or companies in the interest of FO's business; and 5. undertake ahy other activity related to the petroleum business. Initial Capital: Baht 200 million. Initially the government paid in Baht 50 million and will contribute as and when required. Supervision, Control and Management The Minister of Defense exercises general supervision of FO. Board of Directors: 1 Chairman ) 1 Vice-Chairman ) appointment and removal through Council of Ministers 3-11 Directors ) General Manager ex-officio The Board establishes the company's general policy and exercises normal supervision. The Minister of Defense appoints and removes the general manager with the approval of the Council of Ministers. Appendix 12 Page 3 of 5 pages Remittance to Government: The surplus remaining after defraying all expenses and allowing for various reserves has to be transferred to the government. In the event that revenues are insufficient to meet expenses and FO is unable to cover the deficit from other sources, the government has to provide the funds required. Appendix 12 Page 4 of 5 pages Fuel Organization (FO) General Observations The original purpose of creating the fuel organization was to provide a counterpoise against foreign petroleum companies and to supply the public with petroleum projects at prices lower than those of the private companies. FO, however, was not in a position to hold the lower prices for a long time and today, with the government price reglementation in effect for practically all petroleum products, FO's sales prices are the same as those of the private companies. Today FO is a trading company in petroleum products in direct competition with private companies (Esso, Caltex). It enjoys a monopolistic position insofar as all government departments and agencies as well as state enterprises have to purchase their requirements for petroleum products from FO. Only if FO is not in a position to supply the quantity and quality required, the agencies are permitted to buy from private companies. The petroleum sector in Thailand is largely covered by three companies, the FTuel Organization, CALTEX and ESSO. There are three refineries in the country, one of which (the Fang refinery) is only for experimental purposes (operated by the military forces). The two more important ones are: (a) the Bang Jak refinery owned by the military forces. It is, however,leased out to the SUMMIT company, a Chinese firm registered in Panama, which operates the refinery. SUMMIT is the main supplier of FO which does not own refining facilities; and (b) the ESSO refinery. CALTEX imports the finished products and markets them in the country. There is indication that, in the light of the present worldwide energy shortage and the potential oil reserves in the Gulf of Siam, Thailand's energy policy is likely to change. According to information obtained from the National Energy Authority (NEA), an energy policy planning department directly responsible to the Office of the Prime Minister, it is tentatively planned to establish a national oil corporation - or expand FO - the respon- sibility of which would range from refining to marketing final products. This would, however, not mean to expel the private sector completely. It is envisaged that the national corporation's share of the market should not exceed about 30%. Furthermore,it is envisaged to grant drilling concessions only if the concessionnaires undertake to drill at least 30 wells instead of the present average of 3. Appendix 12 Page 5 of 5 pages Taxes The Fuel Organization is income tax exempt. Its remittance to the government has in the past ranged from 50% to 80 of the net profit and is expected to be of the order of 50% in future. In January 1974 the prices for selected petroleum products and the applicable excise tax were as follows: Basic Price Excise Tax (Baht) (Baht) Gasoline (per litre) 2.82 - 3.01 1.30 Kerosene (per litre) 1.78 0.33 Diesel (per litre) 1.53 - 1.60 0.30 Bunker Oil (per litre) 0.67 - 0.69 O.O4 - 0.10 Jet Fuel (per litre) 1.49 0.33 Lubrication Oil (per litre) 8.10 - 8.60 0.33 Grease-non liquid (per kg) 13.44 - 13.71 1.00 Appendix 13 Page 1 of 12 pages Metropolitan Water Works Authority (MWWA) Actual and Forecast Income Statements 1969-1978 Fiscal Year Ending Actual Forecast September 30 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 --------- -- -- in Baht million ---------------------- Water Sales (million m3) 109 114 119 138 182 212 233 254 315 358 Operating Revenues 73 79 84 103 268 336 381 426 529 608 Operating Expenses. Salaries and Wages 69 83 92 95 99 102 Power and Fuel 37 38 39 41 48 52 Chemicals breakdown 19 20 20 21 25 27 Materials not available 35 37 39 46 55 62 Other Expenses 9 10 11 11 12 12 Less: Capitalized Overheads - (11) (13) (13) (13) (11) 10T1 -T11 1210 T10- :79 T77T TUF 2017 227 7 Depreciation 32 34 39 44 44 48 53 88 125 150 Total Operating Cost 133 149 159 200 213 225 241 289 351 394 Operating Income (60) (70) (75) (97) 55 111 140 137 178 214 Interest 1 - - - - 6 23 36 63 92 110 Net Profit/Loss (60) (70) (75) (97) 49 88 104 74 86 10I4 - = - Ra-te of Return 4.4% 8.1% 9.0% 4.8% 4.2% 4.2% Rate Base - - - - 1,255 1,365 1,548 2,868 4,249 5,098 1/ 'TInterest During Construction". Appendix 13 Page 2 of 12 pages Metropolitan Water Works Authority (MWWA) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total in~~~~~~~~~: Bahlt million- ------------- 3n ial mLlon ---------------- SOURCES Internal Operating Income 55 111 140 137 178 214 835 Depreciation 44 48 53 88 125 150 508 Internal Sources Gross 99 159 193 227 303 3 1,343 Less: Remittance to Government - - - - - - - Debt Service: Interest 6 23 36 63 92 110 330 Amortization - - - - 6 15 21 Internal Sources Net 93 13 7 TT 162 52 239 992 External TBRD - 94 262 414 245 120 1,135 ADB 2 102 81 63 159 1 408 Government Previous Loans 128 50 - - - - 178 TRANSFER OF GOVERNMENT FUNDS 139 74 450 630 516 152 1,961 Customers Contributions - 6 7 7 8 8 36 Total Sources 362 462 957 1,276 1,133 520 4,710 APPLICATIONS Investment Expenditures 312 441 962 1,264' 1,151 500 4,630 Variations in Cash and Working Capital 50 21 ( 5) 12 (18) 20 80 Total Applications 362 462 957 1,276 1,133 520 4,710 Appendix 13 Page 3 of 12 pages Metropolitan Water Works Authority (MWWA) All projected financial data are based on the results of Appraisal Report No. 146 a-TH (June 8, 1973). They were discussed with MWWA's management which indicated that, apart from minor modifications in the investment program, they are still valid for the purpose of this report. This although there is at the moment a distinct possibility that the cost of the Bank financed project is likely to increase considerably. Furthermore, the long delay in signing the Bank loan for the Bangkok water supply project and, consequently, the postponement of the effectiveness of the ADB-loan for the same project (see later in this annex) are likely to delay the start of construction to a considerable extent; the 1974/75 investment expenditures therefore appear to be overstated. Notes and Assumptions on Financial Data Operating Revenues 1. Water production in 1973 through 1976, is based on the productive capacity of the system. 1977 onwards it is based on the consultants estimate of water demand. 2. Water unaccounted-for in distribution (difference between water produced and water sold) which was 60% of production in 1972 is estimated to come down to 57% in 1973 and 50% in 1974. Thereafter, a uniform annual decrease of 5% is assumed in 1975 through 1979 bringing down the unaccounted- for water to 25%. 3. Water Billings are arrived at by multiplying the volume of water sales with the average rate per m3. The average rate reported by MWWA for 7 months billing after tariff revision is $ 1.30/m3. With improvement in meter reading and billing procedures and increased water consumption by large users, it is estimated that the average rate will go up to $ 1.44/m3 in 1974 and increase to $ 1.50/m3 in 1975 and to $ 1.65/m3 by 1979. 4. Bad debts are estimated at 4% of billings. 5. Revenue from meter rents is based on the current average rate per meter multiplied by the estimated number of meters in each year. 6. Connection fees are projected on the estimated number of additional connections proposed to be given each year and the estimated cost per connection. The number of connections assumed are as follows: Appendix 13 Page 4 of 12 pages No. of No. of Connections Average Year Ending Connections at New Dis- End of No. of September 30 the Beginning Connections Connections Year Connections -_____--- - -------------- in thousands----------------------- -- 1972 267 14 4 277 272 1973 277 16 4 289 283 1974 289 18 5 302 296 1975 302 20 5 317 310 1976 317 21 6 332 325 1977 332 22 6 348 340 1978 348 24 7 365 357 The average cost of a new connection which was about / 2,500 in 1972 is estimated to decrease to $ 1.850 by 1976 as a result of better scheduling and supervision of labor and improved control over use of materials. The following estimates of Labor and Material costs have been adopted for the projections: Baht per connection Labor Material Total 1972 (Actual) 660 1,840 2,500 1973 600 1,650 2,250 1974 550 1,500 2,050 1975 540 1,400 1,940 1976 through 1978 500 1,350 1,850 Operating Expenses 7. A 26% increase in 1973 under Salaries and Wages reflects provisions of 11% for salary adjustments (/ 6 million) and 15% for additional staff (I 8 million). The estimates for 1974 through 1982 assume a 4% annual increase for normal increments. Employment of additional staff for the project and operations has also been assumed in 1974 and 1975 (16% and 6% respectively) while a net decrease of about 7% has been assumed to occur during 1978-1979 period as the project is completed. Beginning with 1974, the estimated cost of MWWA's staff employed on engineering and supervision of capital works has been capitalized and shown as a deduction from operating costs. 8. Power, Fuel and Chemicals are projected to increase at about the same rate as water production plus a 3% annual increase due to price escalation. Appendix 13 Page 5 of 12 pages 9. Materials include items used for maintenance of the system and for providing new connections. The cost of the former is estimated at 0.5% of the average gross value of fixed assets in operation. The latter is based on the number of new connections and the average cost of material per connection (paragraph 6). 10. Other Expenses comprise rents, telephones, postage and miscellaneous items. They have been projected at about 12 to 13% of salaries and wages. 11. Depreciation has been assumed at 2.5% of the average gross value of assets in operation. 12. It is assumed that NWWA will not be required to make any remittances to Government Treasury out of its net surpluses. Sources and Applications of Funds For the purpose of this report, the transfer of government funds has been assumed in the form of grants except in such cases, where loans from the government have already been committed. As a consequence, the debt service has been reduced as compared to the figures of the appraisal report which assumes future government loans. The FY 1978 investment expenditures have been increased as compared to the appraisal report in order to allow for a continued investment program of a certain magnitude. Appendix 13 Page 6 of 12 pages Metropolitan Water Works Authority (MWWA) Long-Term Borrowing as of September 30, 1973 Lending Organization Loan Amount Interest Term A. FOREIGN ADBIv US$19.6 million 7.5% About 26 years with about 6 years of grace IBRD2/ US$55.o million 7.25% About 26 years with about 6 years of grace B. LOCAL Government $ 259 million 4% 1/ Not yet effective. Not yet signed. Appendix 13 Page 7 of 12 pages Metropolitan Water Works Authority (MWWA) Summary of the MNWA Act 1967 Ministry in Charge: Ministry of the Interior Duties: 1. To survey and explore natural water sources and to acquire them for the waterworks. 2. To produce, supply and sell piped water in the areas of Bangkok, Thonburi, Nonthaburi and Samut Prakan. 3. Conduct other business connected with or beneficial to the waterworks. Capital: 1. The initial capital. 2. Properties and rights taken over from predecessors after deduction of liabilities. 3. Money allocated from state budget appropriation for operation or expansion of the business. 4. Aid funds that may be obtained from a foreign country or an international organization. Supervision, Control and Management General Supervision: Minister of the Interior. Any matter to be submitted to the Council of Ministers shall be channelled through him. Board of Directors 1 Chairman ) Appointment and removal through Council of Ministers. 5-9 directors ) The Board establishes the policy and exercises general supervision. The Board appoints the GENERAL YANAGER of IMWWA (the Chief Executive) subject to the approval of the Council of Ministers. Appendix 13 Page 8 of 12 pazes The Council of Ministers' approval has to be sought before: 1. increasing or decreasing of the capital; 2. borrowing of funds exceeding 5 million Baht; 3. disposing of immovable properties; 4. iriting off properties with a value above 100,000 Baht; and 5. setting tariffs. Budget: The annual investment budget has to be submitted for the Council of Ministers' approval, the operating budget for information. Remittance to Government: The annual revenues after deducting all costs and after allowing for special and investment reserves shall be remitted to the Government. Appendix 13 Page 9 of 12 pages Metropolitan Water Works Authority (MWWA) Tariffs A. Tariff applicable until July 1, 1972 Bangkok 0 - 6 m3 per month free any additional m3 per month / 0.50 Thonburi 0 - 6 m3 per month free any additional m3 per month % 1.50 Nonthaburi per m3 used t 2.00 Samut Prakan: per m3 used / 1.25 B. Tariff effective July 1, 1972 The tariff applies to the whole greater Bangkok area. 0 6 m3 per month free 6 - 12 "I " 0.50 per m3 12 - 25 " " " " 1.00 " " 25 - 50 " " " " 1.50 " " 50 - 200 11 l tt tt 2.00 " it 200 m3 per month and over It 2.50 " It In addition to the basic water rate, a monthly meter rent is charged as follows: Size of Meter Bangkok Thonburi Nonthaburi Samut Prakan - Baht per month --------------------- 1/2"t 0.50 1.00 1.00 1.00 3/4h 0.50 1.50 1.00 1.00 1 ,r 0.75 2.00 2.00 1.00 1-1/2 1.00 2.50 2.00 1.00 2 ,, 1.25 3.00 2.00 1.00 2-1/2 1.50 3.50 2.00 1.00 3X',' 1.75 4.00 5.00 1.00 4" 2.00 5.00 5.00 - 5,) 2.50 6.oo - 6 3.00 8.00 12' 6.oo 10.00 Connection fees are based on estimated cost of labor and material used for providing the new connection. Appendix 13 Page 10 of 12 pager Metropolitan Water Works Authority (MWWA) General Observations and Sector Information MWWA has the responsibility of providing water supply in the greater Bangkok area which comprises the districts of Bangkok, Thonburi, Nonthaburi and Sanut Prakan. In areas where piped water is not available, the Authority provides free supply by water trucks. The public system provides service to about 60% of the 3 million population in the metropolitan area. About 20% of the existing capacity has been added by improvements to the system since 1970. Since 1950, when only about 20% of the area was served, the average annual increase in production has been about 12%. Yet demand has not been met and service has been consistently poor. Should Bangkok's population approach the 10 million mark by the year 2000, an investment of equivalent US$600 million (1969 prices) over 30 years would be required; of this, about US$335 million would be necessary over the first 15 years. Since Thailand does not have a sewerage system of any significance, water pollution, particularly in the Bangkok area is becoming a serious health hazard. To correct the situation, additional investments estimated at about US$140 million equivalent are required over the initial 15-year period in the Bangkok area. MI,WA's Act does not stipulate a minimum coverage of costs through revenues, in effect leaving the question of tariff appropriateness open. The Authority, however, is becoming apprehensive about its finances. It plans to investigate the justification for free supply of the first 6 m3 per month. Furthermore, delivery of nonpiped water free of charge should be discontinued. MWWA's management estimates the annual loss from these activities at $ 60 million and, should it not be permitted to charge appropriately, to approach the government for subsidy. The 1972 tariff increase has raised revenues considerably, especially in the Bangkok region. Tariffs, however, are still lower than in the majority of the rural areas. The water supply sector in Thailand can be roughly divided into the following parts: (a) the Bangkok metropolitan area served by MWWA; (b) communities, other than Bangkok, with a population greater than 5,000; and (c) communities with a population of less than 5,000. Appendix 13 Page ll of 12 pages The supply of water to communities above 5,000 population is the responsibility of the Provincial Water Works Division (PWWD) of the Public and Minicipal Works Department in the Ministry of Interior. It designs, constructs, owns and operates about 145 municipal water systems. At the same time it acts as a consultant for design, construction and operation to about 45 water systems owned by municipalities. Concerning its investments, PWWD is financed from the government budget. Its permanent civil servants are on the government payroll. It also employs a large number of temporary laborers. The wages for these .laborers as well as the expenses for other operation and maintenance of the water systems are defrayed from PWWD's revolving fdnd. This fund is entirely at PWWD's disposal. All consumption of PWWD-supplied water is metered. The consumers have to buy the meters and are charged with a mronthly fee of $ 1 for maintenance. A large number of meters, however, is deficient and PWWD plans to embark on a huge calibration and meter repair program. PWWD's tariff is presently a flat $ 2 per m3, a rate introduced for the whole PWWD supply area by the present government. Earlier PWWD was entitled to charge rates which permitted full cost recovery (operating and capital costs) for the various instal ations. The tariffs consequently applied ranged from about $ 0.6 per m) to $ 8 per m3. The present $ 2 per m.n tariff barely covers operation and maintenance; it is not sufficient to cover cost of capital and overheads. In order to assure reasonably fast development of water supply in communities for which PWWD is responsible, and to adhere to the investments as planned in the Third Five-Year Development Plan 1972-1976 (annual construction of 10 new waterworks and 10 extensions to existing waterworks), investments of the order of $ 400 million per year would be required. So far annual budgetary allocations have never been higher than about $ 200 million and are not expected to increase above $ 250 million. Consequently it is impossible to execute the projects as planned. A number of agencies (about 10) are concerned with water supply to communities with a population of less than 5,000, which is normally referred to as "Rural Water Supply". The most important agency in this field is the Sanitary Engineering Division (SED) of the Department of Public Health in the Ministry of Health. It was set up as a consequence of a study made by WAH0 and UNICEF, and is in charge of the "Potable Water Supply Project". SED is responsible for planning, design and construction of waterworks which it turns over to the communities for operation, frequently free of charge. Financing of some of the projects, however, is done according to a pre-agreed formula, for instance 60% government budget, 40% community. SED's staff train plant operators and render advice on operation and maintenance of water systems. Appendix 13 Page 12 of 12 pages In addition to SED, the Accelerated Rural Development Department (ARD) in the Ministry of Interior enploys its own engineers and drills wells which it donates to small communities. The Public Works Department owns 12 drilling rigs, drilling about 220 small wells per year. The Mineral Resources Department has received a number of drilling rigs from USOM and is drilling about 500 small wells per year. Appendix 11. Page 1 of lh pages Before Revenue Adjustment Electricity Generating Authority of Thailand (EGAT) Actual and Forecast Income Statements 1970-1978 Actual Forecast Fiscal Year Ending September 30: 1970 1971 1972 1973 1974 1975 1976 1977 1978 - in Baht million -- ----------- Sales of Energy (GWh) MEA 2,744 3,165 3,679 4,488 5,160 6,020 6,850 7,650 8,520 PEA 786 931 1,235 1,506 1,740 1,950 2,235 2,520 2,910 Other Customers 326 369 369 405 415 418 563 566 569 Total Sales 3),56 TJ]6 5 32T3 6,399 7737 8,388 9,6140 - 11,99 9 Average Revenues per kwh Sold (stang) 30 29 29 29 29 29 29 29 29 MEA 29 28 29 28 28 23 28 28 28, PEA 33 3 33 33 33 33 33. 33 33 Other Customers 27 26 23 24 23 23 23 23 23 Operating Revenues MEA 797 902 1,048 1,249 1,445 1,686 1,918 2,142 2,386 PEA 262 311 402 476 574 644 738 832 960 Other Customers 89 94 86 101 93 96 129 130 131 1,1148 1,307 -1,526 2,112 T2,V2 2,785 3,1014 3,77 Other Operating Revenues 8 8 7 6 8 8 8 8 8 Total Operating Revenues 1,156 1,315 T,T3 1,o32 2,120 3 2,793 3,112 3,4b3 Operating Expenses Fuel 385 345 389 548 1,064 1,416 1,698 1,840 2,066 Purchased Energy - - 30 18 14 13 11 18 36 Operation, Maintenance, Administration 181 197 269 297 274 308 335 373 419 Depreciation 184 201 269 303 431 477 529 595 650 Total Operating Expenses 70 77 1,166 1,783 273 2,26 3,171 Operating Income 406 572 586 666 337 220 220 286 3114 Interest 155 172 193 211 280 320 360 400 405 Net Profit (Loss) 251 1 400 393 455 57 (100) (140) (114) (91) Rate Base (Average Net Fixed Assets in Operation) 5,162 5,640 6,326 7,271 8,737 10,03910,712 11,529 12,724 Rate of Return 7.9% 10.1% 9.3% 9.2% 6.3% 2.2% 2.1% 2.5% 2.5% Appendix 14 Page 2 of 14 pages Before Revenue Adjustment Electricity Generating Authority of Thailand (EGAT) Forecast Sources and Applications of Funds 1974-1978 Fiscal Year Ending September 30: 1974 1975 1976 1977 1978 Total -- -- in Baht million ------------------ SOURCES Internal Operating Income 337 220 220 286 314 1,377 Depreciation 431 477 529 595 650 2 682 Internal Sources Gross 779 7917 779 4,059 Less: Bonus for Previous Year 21 2 - - - 23 Interest 280 320 360 400 405 1,765 Amortization 320 400 460 510 730 2 420 Internal Sources Net 7 T7) T71) (29) (771) II9) External IBRD (Ban Chao Nen) 55 158 311 449 218 1,191 OECF (Ban Chao Nen) 12 76 187 201 223 699 EGAT Bonds 300 - - - - 300 Other Foreign Loans 636 1,239 1,466 1,201 1,021 5,563 TRANSFER OF GOVERNMENT FUNDS 584 1 496 1,524 1,295 1,180 6,079 Total External Sources 1,557 2,5T9 T-74l 3,146 2,642 13,532 TOTAL SOURCES 1,734 2,944 3,417 3,117 2,471 13,683 APPLICATIONS Construction Expenditures 1,808 2,910 3,232 2,902 2,569 13,421 Variations in Working Capital (74) 34 185 215 (98) 262 TOTAL APPLICATIONS 1,734 2,944 3,417 3,117 2,471 13,683 Percentage of Investment Expenditures Financed by Net Internal Sources Annual 8% - - - - - 4-Year Average - Appenidix IL Page 3 of 14 pages After Revenue Adjustment Electricity Generating Authority of Thailand (EGAT) Forecast Income Statements 1974-1978 Fiscal Year Ending September 30: 1974 1975 1976 1977 1978 -in Baht million- Sales of Energy (GWh) MEA 5,160 6,020 6,850 7,650 8,520 PEA 1,740 1,950 2,235 2,520 2,910 Other Customers 415 418 563 566 569 Total Sales 7,317 9 , 6 40 10,736 11,999 Average Revenues per kwh Sold (stang) MEA 37 39 38 37 37 PEA 37 39 38 37 37 Other Customers 28 30 30 29 29 Operating Revenues MEA 1,893 2,329 2,615 2,862 3,181 PEA 639 754 853 943 1,087 Other Customers 117 127 168 166 167 Other Revenues 8 8 8 8 8 EQUALIZATION PAYMENTS (INCOMING) 157 207 273 288 277 EQUALIZATION PAYMENTS (OUTGOING) - - - - - Total Operating Revenues 2,ol4 3,425 3,917 4,267 4,720- Operating Expenses 1,783 2,214 2,573 2,826 3,171 Operating Income 1,031 1,211 1,344 1,441 1,549 Interest 280 320 360 400 405 Net Profit 751 891 984 1,041 1,144 Rate Base (Average Net Fixed Assets in Operation) 8,737 10,039 10,712 11,529 12,724 Rate of Return 11.8% 12.1% 12.5% 12.5% 12.2% Appendix 1!1 Page 4 of 114 pages After Revenue Adjustment Electricity Generating Authority of Thailand (EGAT) Forecast Sources and Applications of Funds 1974-1978 Fiscal Year Ending September 30 1974 1975 1976 1977 1978 Total --- -- in Baht million ---- ------------ SOURCES Internal Operating Income 1,031 1,211 1,344 1,441 1,549 6,576 Depreciation 431 477 529 595 650 2,682 Internal Sources Gross 1462 10 1,o73 2,036 2,199 9,258 Less: Bonus for Previous Year 21 30 34 36 38 159 Interest 280 320 360 400 405 1,765 Amortization 320 400 460 510 730 2 420 Internal Sources Net 91 9 1,019 1,090 1.026 ,SlCt External IBRD (Ban Chao Nen) 55 158 311 449 218 1,191 OECF (Ban Chao Nen) 12 76 187 201 223 699 EGAT Bonds 190 - - - - 190 Other Foreign Loans 636 1,239 1,466 1,201 1,021 5,563 TRANSFER OF GOVERNMENT FUNDS - 533 434 176 - 1 143 Total External Sources 893 2,006 72,3-9 2,027 1,462 ot, TOTAL SOURCES 1,734 2,944 3,417 3,117 2,488 13,700 APPLICATIONS Construction Expenditures 1,808 2,910 3,232 2,902 2,569 13,421 Variations in Working Capital (74) 34 185 215 (81) 279 TOTAL APPLICATIONS 1,734 2,944 3,417 3,117 2,488 13,700 Percentage of Investment Expenditures Financed by Net Internal Sources Annual 46% 32% 31% 37% 4°% Appendix 14 Page 5 of 14 pages Electricity Generating Authority of Thailand (EGAT) Notes and Assumptions on Financial Statements The financial statements have been drawn up in two versions: (i) before tariff adjustment; and (ii) after tariff adjustments. In both versions the expenses have been forecast assuming all expected increases; the revenues, however, have been kept at today's levels in version (i) but have been increased as required in version (ii). Fuel In line with the presently experienced fuel cost increases, a 60% cost increase has been assumed for 1974 and additional 40O in 1975. This allows for the fact that the full impact of the oil price adjustments will be felt not before FY 1975. Purchased Energy With the completion of the Nam Ngum project in Laos (FY 1972), EGAT plans to import between 230 GWL and 420 GWh per year in future. According to EGAT, the price for the energy has been fixed at 9 stang/kwh; this price, therefore, has been included in the financial projections. Operation, Maintenance, Administration The forecast of operation and maintenance expenses is based on a detailed analysis carried out by EGAT of the number and qualification of staff employed at the end of FY 1972 and of the level of expenditures other than salaries and wages by each generating unit throughout Thailand. Administration expense is increased by 10% per year. Depreciation Estimates are based on the useful lives of assets. Appendix 14 Page 6 of 14.pages Electricity Generating Authority of Thailand (EGAT) Summary of the EGAT-Act 1968 Government Agency in Charge: The Prime Minister Objectives: 1. to generate, acquire, transmit or distribute electric energy to: (a) the Metropolitan Electricity Authority (MEA), the Provincial Electricity Authority (PEA), and other electricity authorities under the law; (b) other electricity consumers as permitted by law; and (c) neighbouring countries. 2. to undertake other activities concerning electric energy; and 3. to produce and sell lignite, or chemicals derived from lignite. Powers: 1. to construct, purchase or otherwise procure facilities required for the generation and transmission of electric energy; 2. to borrow money; and 3. to issue bonds or other certificates. Supervision, Control and Management Board of Directors: 1 Chairman )appointed by the Council of Ministers up to 9 members ) The Board appoints the general manager who is ex-officio member. His appointment or removal has to be approved by the Council of Ministry. The tariffs which have to be approved by the Council of Ministers have to be sufficient to cover all expenses to provide for reasonable reserves adequate to meet contingencies and to cover a substantial portion of the cost of investment. Appendix 1b Page 7 o 1i4 pages Budget: The annual investment budget has to be submitted to the Council of Ministers for approval. It has to be accormpanied by the operational budget for information. Remittance to Government: The annual surplus remaining after deduction of all expenses has to be transferred to the government. Should revenues be insufficient to cover expenses, the government has to cover the deficit. Appenidix l14 Page o of 1h pages Electricity Generating Authority of Thailand (EGAT) Long-Term Borrowings as of September 30, 1973 Repayment Termris Withdrawn to Rate of Half Yearly (H) September 30, Interest or Yearly (Y) Date of Authorized 1973 per Instalment Agreement Amount (C) = closed Annum Number Commencing FOREIGN CURRENCY LOANS (guaranteed by the Kingdom of Thailand) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT September 12, October 1957 (175 TH) $ 66,000,000 $ 65,788,494 (C) 5-3/4 39H 15, 1963 March 7, April 1963 (333 TH) $ 6,600,000 $ 6,559,835 (C) 5-1/2 35H 15, 1966 March 22, February 1965 (406 TH) $ 6,000,000 $ 5,982,165 (C) 5-1/2 33H 15, 1969 March 24, February 1967 (489 TH) $ 5,000,000 $ 4,997,390 (C) 6 25H 15, 1970 February 10, February 1970 (655 TH) $ 46,500,000 $ 41,181,197 7 31H 15, 1975 November 11, December 1971 (790 TH) $ 27,000,000 $ 3,243,818 7-1/4 30H 15, 1976 EXPORT-IMPORT BANK OF THE UNITED STATES February 16, June 1962 (1769) $ 10,000,000 $ 9,765,629 (C) 5-3/4 24H 15, 1964 BANK OF THAILAND September 23, May 1966 $ 10,000,000 $ 9,573,869 (C) 5-1/2 24H 1, 1970 INTERNATIONAL CO-OPERATION ADMINISTRATION August 11, July 1958 $ 3,570,000 $ 3,570,000 6 32H 1, 1962 Appendix 14 Page 9 of 14 pages Repayment Terms Withdrawn to Rate of Half Yearly (H) September 30, Interest or Yearly (Y) Date of Authorized 1973 per Instalment Agreement Amount (C) closed Annum Number Commencing OSTERREICHISCHE LANDERBANK April 6, May 1966 A.Sch. 42,381,000 A.S. 42,381,000 5 18H 1, 1969 October 2, September 1970 A.Sch. 68,833,868 A.S. 68,833,868 6 18H 30, 1973 CREDITANSTALT BANKVEREIN April 6, May 1966 A.Sch. 42,590,500 A.S. 42,590,500 5 18H 1, 1969 October 2, September 1970 A.Sch. 73,696,001 A.S. 73,696,001 6 18H 30, 1973 OVERSEAS ECONOMIC CO-OPERATION FUND July 17, August 1970 (T-2) Yen 3,135,392,010 Yen 2,804,394,834 4-1/2 30H 20, 1975 April 26, August 1971 (T-6) Yen 781,700,760 Yen 571,194,606 4-1/2 30H 20, 1976 September 23, February 1971 (T-7.1) Yen 1,152,000,000 Yen 757,593,526 4-1/2 30H 20, 1977 January 28, February 1972 (T-8) Yen 853,550,136 Yen 660,107,298 4-1/2 30H 20, 1977 March 29, August 1972 (T-7.2) Yen 470,000,000 Yen 310,735,833 4-1/2 30H 20, 1977 ASIAN DEVELOPMENT BANK December 21, February 1970 15,800,000 $ 3,832,158 7-1/2 36H 1, 1975 KREDITANSTALT FUR WIEDERAUFBAU April February 10, D.M. 5,140,800 D.M. 5,140,800 6 18H 1, 1973 1970 Appendix 11 Page 10 of 14 pages Repayment Terms Withdrawn to Rate of Half Yearly (H) September 30, Interest or Yearly (Y) Date of Authorized 1973 per Instalment Agreement Amount (C) = closed Annwu Number Commencing BAHT LOANS MINISTRY OF FINANCE (Taken over from Yanhee Electricity Authority) June 24, December 1963 (11/06) g 40,000,000 X 40,000,000 4 30H 15, 1968 June 15, June 1964 (21/07) 6 65,000,000 0 65,000,000 5-3/4 20H 15, 1974 (Interest on this loan was accumulated until June 15, 1969 when the amount so accumulated was payable in 30 equal half yearly instalments commencing on that date.) February 15, June 1966 (44/09) X 40,000,000 X 40,000,000 6 30H 15, 1971 May 9, June 1968 (57/11) Z 175,000,000 0 146,692,000 6 20H 15, 1973 May 9, June 1968 (58/11) X 100,000,000 X 100,000,000 6 20H 15, 1973 April 3, June 1969 (64/12) X 170,000,000 X 170,000,000 6 20H 15, 1974 April 3, June 1969 (65/12) $ 20,000,000 X 20,000,000 6 16H 15, 1971 April 3, June 1969 (66/12) $ 40,000,000 X 40,000,000 6 20H 15, 1974 (Taken over from Lignite Authority) July 20, August 1962 (6/05) $ 5,000,000 $ 5,000,000 4 8Y 6, 1967 September 30, May 1964 (22/07) M 13,015,635 $ 13,015,635 6(D8) lOY 20, 1974 October 12, May 1964 (23/07) $ 30,000,000 X 30,000,000 6(Dlo) lOy 20, 1974 October 12, January 1964 (24/07) X 6,284,36$ M 6,284,365 6(D8) lOY 10, 1973 4ppendix 14 Page 11 of 1l4 pages Repayment Terms Withdrawn to Rate of Half Yearly (H) September 30, Interest or Yearly (Y) Date of Authorized 1973 per Instalment Agreement Amount (C) closed Annum Number Commencing (Taken over from Lignite Authority) December 30, January 1964 (27/07) X 9,000,000 X 9,000,000 6(D8) lOY 10, 1973 JTune 30Q January 1965 (29/08) 0 2,097,891 X 2,097,891 6(D8) lOY 10, 1973 October 29, May 1965 (36/08) X 33,000,000 X 33,000,000 6(D8) lOY 20, 1974 December 8, January 1965 (40/08) X 8,700,000 X 8,700,000 6(D8) loY 10, 1973 October 14, May 1966 (48/09) X 28,206,300 X 28,206,300 6(D8) lOY 20, 1974 October 14, January 1966 (49/09) X 2,050,000 0 2,050,000 6(D6) lOY 10, 1973 October 12, October 1967 (54/10) X 31,000,000 M 31,000,000 6(D5) 20Y 15, 1972 October 21, October 1968 (60/11) 0 43,493,000 0 43,493,000 6(D4) 20Y 15, 1972 (NOTE: The letter D in brackets after the interest rate indicates that the interest on the loan has to be accumulated to the date when loan repayments start and is then payable in equal instalments over the number of years after the letter D in the brackets.) (Taken over from Northeast Electricity Authority) June 24, September 1968 (KYW) 0 275,600,000 0 275,496,967 3 5lY 30, 1969 (Interest is only payable on this loan as from October 1, 1983) October 30, September 1967 (55/10) 0 21,500,000 0 21,500,000 6 12Y 30, 1968 December 3, September 1968 (62/11) X 14,782,000 0 14,782,000 6 lOY 30, 1971 Appendix 14 Page 12 ofil1 pages Repayment Terms Withdrawn to Rate of Half Yearly (H) September 30, Interest or Yearly (Y) Date of Authorized 1973 per Instalment Agreement Amount (C) = closed Annum Number Commencing (EGAT) January 6, January 1970 (75/13) f 36,000,000 X 36,000,000 6 20H 15, 1975 January 6, October 1970 (76/13) X 49,000,000 X 49,000,000 6 20H 15, 1972 (Interest on this loan has to be accumulated to October 15, 1972 when the amount so accumulated is payable in 3 equal annual instalments starting on that date.) March 23, June 1970 (78/13) M 100,000,000 M 99,630,000 6 20H 15, 1974 March 23, November 1970 (79/13) X 125,500,000 X 125,500,000 6 20H 15, 1974 March 23, December 1970 (80/13) X 80,000,000 X 80,000,000 6 20H 15, 1974 August 26, August 1970 (83/13) X 23,000,000 X 22,763,000 6 30H 15, 1975 October 15, 1970 (Income January Remittance) X 204,796,040 $ 204,796,040 6 24H 15, 1973 September 2, August 1971 (91/14) $ 200,000,000 M 117,390,000 6 30H 1, 1976 September 2 August 1971 (92/14J3 1,960,000 M 1,960,000 6 28H 15, 1976 September 2, August 1971 (93/14) X 5,100,000 $ 5,100,000 6 30H 1, 1976 September 2, August 1971 (94/14) M 42,000,000 X 42,000,000 6 30H 1, 1976 September 2, , October 1971 (95/14) X 15,640,000 X 15,640,000 6 20Y 15, 1972 (Interest on this loan has to be accumulated to October 15, 1972 when the amount so accumulated is payable in 2 equal annual instalments starting on that date.) Appendix 111 Page 13 of 14 pages Repayment Terms Withdrawn to Rate of Half Yearly (H) September 30, Interest or Yearly (Y) Date of Authorized 1973 per Instalment Agreement Amount (C) closed Annum Number Commencing May 10, August 1972 (103/15) M 21,805,000 X 21,805,000 6 26H 15, 1977 May 10, March 1972 (104/15) X 20,000,000 X 13,710,000 6 30H 15, 1977 May 10, August 1972 (105/15) X 31,637,000 X 31,637,000 6 30H 1, 1977 March 21, August 1973 (110/16) B 27,000,000 $ 16,110,000 6 30H 1, 1977 March 21, November 1973 (111/16) X 130,000,000 $ 4,000,000 6 30H 15, 1977 March 21, November 1973 (112/16) 0 113,363,000 X 28,510,000 6 30H 15, 1977 INVESTMENT BONDS September 1, September 1972 50,000,000 Z 50,000,000 9 lY 1, 1977 July 1, July 1973 20,000,000 X 4,078,000 7-3/4 lY 1, 1978 July 1, July 1973 X 230,000,000 X 230,000,000 8 lY 1, 1978 METROPOLITAN ELECTRICITY AUTHORITY (for property transferred) August 23, Free of- Repayable when 1961 - 13,263,017 interest EGAT receives an Appropriation from Government of Thailand budget for that purpose. INTERNATIONAL CO-OPERATION ADMINISTRATION August 11, July 1958 44,582,ooo g 44,582,000 6 32H 1, 1962 Appendfix 14 Page 14 of 14 pages Electricity Generating Authority of Thailand (EGAT) Tariffs A. General Tariff 1. Demand Charge: Baht 34/kW 2. Energy Charge: 0 - 120 kWh per kW-demand 28 stang/kWh 121 - 410 " " f" " 22 " / " Over 410 " ft f" ft 14 " / t B. Tariff for Special Industries 1, Demand Charge: Baht 30/kW 2. Energy Charge: 19 stang/kWh E albedustries (a) Steel Mills: (i) Power demand in excess of 2,000 kW (ii) Power used exclusively for furnaces, processing and drawing of steel forms. (b) Electro-Chemical Processing: (i) Power demand in excess of 1,500 kW (ii) Load factor in excess of 85% (iii) Power expense in excess of 50% of production cost. Appendix 15 Page 1 of 11 pages Before Revenue Adjustment Metropolitan Electricity Authority (MEA) Actual and Forecast Income Statements 1969-1978 Actual Forecast Fiscal Year Ending September 30: 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 ------ in Baht million ------------------------ Sales of Energy (GWh) 2,188 2,581 3,000 3,510 4,142 4,876 5,690 6,474 7,230 8,052 Average Revenues per kwh Sold (stang) 45.5 44.9 42.2 41.7 40.7 40.7 40.7 40.7 40.7 40.7 Operating Revenues Sales of Power 995 1,160 1,267 1,462 1,685 1,985 2,316 2,635 2,943 3,277 Other Revenues 21 25 29 29 49 25 25 25 25 25 Total Operating Revenues 1,016 1,105 1,296 1,491 1,734 2,010 2,63 60 2,6 3,302 Operating Expenses Energy Purchased 672 797 902 1,048 1,249 1,445 1,686 1,918 2,142 2,386 Other Operating Expenses 91 107 122 142 186 220 240 265 310 350 Depreciation 46 54 61 67 61 94 112 129 147 165 Total Operating Expenses o gS -,a7 1,025 1,297 1,496 1,759 2,038 2,312 2,599 2,901 Operating Income 207 227 211 234 238 251 303 348 369 401 Interest 20 19 17 17 19 20 33 51 69 82 Net Profit 187 208 194 217 219 231 270 297 300 319 Rate Base (Average Net Fixed Assets in Operation) 1,220 1,369 1,544 1,765 2,056 2,410 2,801 3,218 3,609 3,975 Rate of Return 17.0% 16.6% 13.7% 13.3% 11.6% 10.4% 10.8% 10.8% 10.2% 10.1% Appendix 15 Page 2 of 11 pages Before Revenue Adjustment Metropolitan Electricity Authority (MEA) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total ---- in Baht million ------------------------- SOURCES Internal Operating Income 238 251 303 3h8 369 401 1,91c Depreciation 61 96 112 129 147 165 78D8 Internal Sources Gross 299 7 7 77 7 7 2,1 Less: Remittance to Gov't. 65 66 69 81 89 90 460 Interest 19 20 33 51 69 82 274 Amortization 27 30 38 45 48 91 279 Internal Sources Net n 229 1,605 External Consumers' Contributions 55 60 60 60 60 60 355 Customers' Deposits 2 2 2 2 2 2 12 Income from Other Operations 25 25 25 25 25 25 150 ADB-Loan 75 192 290 235 - - 792 Total External Sources 157 279 377 32_2 7 7T 1,309 TOTAL SOURCES 345 508 652 622 397 390 2,914 APPLICATIONS Construction Expenditures 370 445 532 522 503 523 2,895 Variations in Working Capital (25) 63 120 100 (106) (133) 19 TOTAL APPLICATIONS 345 508 652 622 397 390 2,914 Percentage of Investment Expenditures Financed by Net Internal Sources 50.8% 51.5% 51.70% 57.5% 61.6% 57.9% Appendix 15 Page 3 of 11 nages After Revenue Adjustment Metropolitan Electricity Authority (MEA) Forecast Income Statements 1974-1978 Fiscal Year Ending September 30 1974 1975 1976 1977 1978 Fc Ya dgetb 3in Baht million ----- Sales of Energy (GWh) 4,876 5,690 6,474 7,230 8,052 Average Revenues per kwh Sold (stang) 54.6 56.5 56.0 55.6 55.6 Operating Revenues Revenues from Sales of Power 2,661 3,217 3,628 4,017 4,1477 Other Revenues 25 25 25 25 25 EQUALIZATION PAYMENTS (INCOMING) - - - - - BEUALIZATION PAYMENTS (OUTGOING) (318) (432) (515) (567) (589) Total Operating Revenues 2,368 2,510 3,130 3,75 3,913 Operating Expenses Energy Purchased 1,893 2,329 2,615 2,862 3,181 All Other Operating Expenses 314 352 394 457 515 Total Operating Expenses 2,207 2,681 3,009 3,319 T,96 Operating Income 161 129 129 156 217 Interest 20 33 51 69 82 Net Profit 141 96 78 87 135 Rate Base (Average Net Fixed Assets in Operation) 2,410 2,801 3,218 3,609 3,975 Rate of Return 6.7% 4.6% 4.C% 4.3% 5.5% Appendix 1) Page It of 11 pages After Revenue Adjustment Metropolitan Electricity Authority (MEA) Forecast Sources and Applications of Funds 1974-1978 Fiscal Year Ending September 30 1974 1975 1976 1977 1978 Total -------------- in Baht million --------------- SOURCES Internal Operating Income 161 129 129 156 217 792 Depreciation 94 112 129 147 165 647 Internal Sources Gross 25 21 7 7 303 37 1,439 Less: Interest 20 33 51 69 82 255 Amortization 30 38 45 48 91 252 Internal Sources Net 207 170 162 209 932 External Consumers' Contributions 60 60 60 60 60 300 Customers' Deposits 2 2 2 2 2 10 Income from Other Operations 25 25 25 25 25 125 ADB-Loan 192 290 235 - - 717 New Loans - Foreign - - - 240 237 477 Total External Sources 279 377 322 327 32T TOTAL SOURCES 484 547 484 513 533 2,561 APPLICATIONS Construction Expenditures 445 532 522 503 523 2,525 Variations in Working Capital 39 15 (38) 10 10 36 TOTAL APPLICATIONS 484 547 484 513 533 2,561 Percentage of Construction Expenditures Financed by Net Internal Sources 46% 32% 31% 37% 40% Appendix 15 Page 5 of 11 pages Metropolitan Electricity Authority (MEA) Notes on Financial Statements The financial statements are based on data obtained from MEA. They take into account the expected power demand increase and have been reconciled with the power supply figures from EGAT. The statements have been drawn up in two versions: (i) before tariff adjustment; and (ii) after tariff adjustment. In both versions the expenses have been forecast assuming all expected increases; the average revenues, however, have been kept at today's levels in version (i), but have been adjusted as required in version (ii). Appendix 15 Page 6 of 11 pages Metropolitan Electricity Authority (MEA) Tariffs Schedule 1 Residential Service Applicable To the electric service through a single watt-hour meter for lighting and appliances used in a dwelling place including related grounds and buildings, monasteries and churches of all religions. Monthly Rate Energy Charge: First 5 kwh or less Baht 5.00 Next 45 kwh " 0.70 per kwh Next 100 " " 0.62 " " Next 350 " " 0.52 " Over 500 it t 0.41 t Minimum Charge: Baht 5.00 per month. Schedule 2 Small Residential Service (For Existing Customers Under This Category Only) Applicable To the electric service through a single watt-hour for lighting and appliances used in a small dwelling place consuming not more than 20 kwh per month. Month Rate Energy Charge: First 5 kwh or less Baht 4.00 Next 15 "t " 0.60 per kwh Over 20 It t 1.53 " Minimum Charge: Baht 4.oo per month. Note In case the consumption of a customer under Schedule 2 is more than 23 kwh per month, Schedule 1 shall apply. If monthly consumption is above 20 kwh more often than twice during a one-year period, the customer shall be classified uħader Schedule 1. Appendix 15 Page 7 of 11 pages Schedule 3 Small Business Service Applicable To the electric service through a single watt-hour meter for any business with a maximum 15-minute integrated demand of less than 30 kilowatts. Monthly Rate Energy Charge: First 5 kwh or less Baht 10.00 Next 75 ft " 0.71 per kwh Next 220 " it 0.57 ft "t Next 700 " 0.52 It "t Next 2000 " o.46 it Over 3000 o " 0.41 ti Minimum Charge: Baht 10.00 per month. Note During the billing month any customer under Schedule 3 whose maximum demand is 30 kilowatts or more shall be classified under Schedule 4-A or 4-B accordingly, and shall be reclassified under Schedule 3 only when his demand has fallen below 30 kilowatts for 12 consecutive months. Schedule 4-A Medium Business Service Applicable To the electric service through a single demand meter for any business with a maxirum 15-minute integrated demand of between 30 to 499 kilowatts. Monthly Rate Demand Charge: First 50 kw of billing demand Baht 33. 0C-p-r ckw Next 150 "t 29.00 Over 200 " " " n " 23.00 t t Energy Charge: First 50 kwh per kw of biling demand Baht 0.35 per kwh Next 150 "t It if "t " t " t it 0,32 Next 200 " " " " " " t 0.25 " " Over 400 t " I I ; n t 0.18 ' Minimum Charge: The demand charge for 60% of the highest billing demand occurring during the last 12 months ended with the current month. Billing Demand: The billing demand (determined to the nearest whole kilowatt) shall be the maximum 15-minute integrated demand during the monthly billing period. Appendix 15 Page 8 of 11 pages Schedule 4-B Large Business Service Applicable To the electric service through a single demand meter for any business with a maximum 15-minute integrated demand of 500 kilowatts or over. Monthly Rate Demand Charge: First 1,000 kw of billing demand Baht 21.00 per kw! Over 1,000 " it it it I 17.00 " " Energy Charge: First 200 kwh per kw of billing demand Baht 0.28 per kwh Next 280 " 1 " " It It " 0.25 " " Over )480 " 1 " H " " it 0.17 " H Minimum Charge: The demand charge for 60% of the highest billing demand occurring during the last 12 months ended with the current month. Billing Demand: The billing demand (determined to the nearest whole kilowatt) shall be the maximum 15-minute integrated demand during the monthly billing period. Schedule 4-C Large Business Off-Peak Service Applicable To the electric service through a single demand meter for any large business with a maximum 15-minute integrated demand of 1,000 kilowatts or over, and the consumption of electricity which can be interrupted or reduced during the on-peak period, currently taken during 18.30 - 20.30 hours each day. Monthly Rate Off-Peak Period Demand Charge: Baht 23.00 per kw of off-peak billing demand. Energy Charge: Baht 0.19 per kwh. On-Peak Period Demand Charge: Baht 67.00 per kw of on-peak billing demand. Energy Charge: Baht 0.19 per kwh. Minimum Charge: The demand charge for 100% of the highest off-peak billing demand occurring during the last 12 months ended with the current month. Appendix 15 Page 9 of 11 pages Schedule 5 Stand-By Service Applicable To any business customer who: (1) has power requirement of 300 kva or more, (2) normally, has all or part of his power requirement furnished by other source of supply or a privately owned plant, (3) through a single demand meter, desires a permanent connection with the MEA's system as a stand-by power source when customer's own source of supply fails or breaks down temporarily or in case of emergency. Monthly Rate (1) In case the stand-by service is not used during any billing month, the stand-by demand charge shall be: First 499 kw Baht 17.00 per kw Over 499 kw Baht 14.00 per kw (2) In case the stand-by service is used during any billing month, the charges shall be of either the regular schedule applicable or the stand-by charge, whichever is higher. Appendix 15 Page 10 of 11 pages Metropolitan Electricity Authority (MEA) Summary of the MEA-Act 1958 Ministry in Charge: Ministry of the Interior Objectives and Powers: 1. to purchase and supply electric energy; 2. to construct, purchase or otherwise procure facilities required for the distribution of electric energy; and 3. to borrow money. Capital of MEA: 1. Government budgetary appropriations. 2. Initial net assets as transferred from the Department of Public and Municipal Works and of the Ministry of the Interior upon creation of MEA. Supervision, Control and Management General Supervision: Minister of the Interior. Any matter which has to be submitted to the Council of Ministers has to be channelled through him. Board of Directors: 519 members ) appointed by the Council of Ministers The Board appoints the General manager who is ex-officio member. His appointment and removal has to be approved by the Council of Ministers. The Council of Ministers' approval has to be sought before: 1. increasing or reducing the capital; 2. borrowing in excess of Baht 5 million; and 3. disposing of immovable property or writing off property valued in excess of Baht 100,000. Appendix 15 Paze 11 of 11 pages Budget: The annual investment budget has to be submitted to the Council of Ministers for approval. It has to be accompanied by the operational budget for information. Remittance to Government: The annual surplus remaining after deduction of all exqpenses has to be transferred to the government. Should revenues be insufficient to cover expenses, the govern- ment has to cover the deficit. Appendix 16 Page 1 of 10 pages Before Revenue Adjustment Provincial Electricity Authority (PEA) Actual and Forecast Income Statements 1969-1978 Actual Forecast Fiscal Year Ending September30 19692 1970 1971 1972 1973 1974 1975 1976 1977 197c ---- ----------------- in BaEt mlllion------------------ Sales of Energy (GWh) 602 769 924 1,212 1,557 1,667 1,875 2,135 2,400 2,754 Average Revenues/kwh Sold (stang) 74 68 67 63 60 60 60 60 60 60 Operating Revenues From Sales of Power 444 527 623 762 936 1,000 1,125 1,281 1,440 1,652 Other Revenues 39 37 43 57 68 63 69 70 70 71 Total Operating Revenues 6 Z 19 1,004 1063 1,19 1,351 1,510 1,723 Operating Expenses Energy Purchased 205 262 311 402 476 574 644 738 832 960 Fuel 51 50 51 49 54 86 108 108 108 108 Other Operating Expenses 138 158 188 173 228 292 327 368 417 478 Depreciation 38 42 52 60 68 77 86 96 105 114 Total Operating Expenses 432 12 50 7 1,029 T 1,310 1,4662 70 Operating Income 51 52 64 135 178 34 29 41 48 63 Interest 6 8 10 13 17 22 30 35 39 38 Net Profit 45 44 54 122 161 12 ( 1) 6 9 25 Rate Base (Average Net Fixed Assets in Operation) 534 674 824 933 1,052 1,173 1,350 1,628 1,922 2,235 Rate of Return 9.6% 7.7t 7.8% 14.5% 16.9% 2.9% 2.1% 2.5% 2.5% 2.8% Appendix 16 Page 2 of 10 pages Before Revenue Adjustment Provincial Electricity Authority of Thailand (PEA) Forecast Sources and Applications of Funds 1973-1978 Fiscal Year Ending September 30 1973 1974 1975 1976 1977 1978 Total ------ -- in Baht million --------- ------ SOURCES Internal Operating Income 178 34 29 41 48 63 393 Depreciation 68 77 86 96 105 114 546 Internal Sources Gross 2 111 117 137 1 T7 93 Less: Interest 17 22 30 35 39 38 181. Amortization 19 19 22 25 25 27 137 Internal Sources Net 210 70 U 77 T 112 F2E External Customers' Deposits 11 15 16 16 17 17 92 Foreign Loans 15 21 145 186 172 180 719 TRANSFER OF GOVERNMENT FUNDS - 80 153 131 162 170 696 7 V 3174 333 371 -37 107 TOTAL SOURCES 236 186 377 410 440 479 2 .128 APPLICATIONS Construction Expenditures Development 88 81 145 171 197 239 921 Other Investment 133 85 207 214 208 200 1 047 Total Construction Expenditures 221 T1, 3 7 I 7 i Variations in Working Capital 15 20 25 25 35 40 160 TOTAL APPLICATIONS 236 186 377 410 440 479 2_128 Percentage of Investment Expenditures Financed by Net Internal Sources 95% 42% 18% 20% 22% 26% Append'ix 16 Page 3 of 10 pages After Revenue Adjustment Provincial Electricity Authority (PEA) Forecast Income Statements 1974-1978 Fiscal Year Ending September 30 1974 1975 1976 1977 1978 Sales of Energy (GWh) 1,667 1,875 2,135 2,400 2,754 Average Revenues per kwh Sold (stang) 54.6 56.5 56.0 55.6 55.6 Operating Revenues Revenues from Sales of Power 910 1,060 1,196 1,333 1,531 Other Revenues 63 69 70 70 71 EQUALIZATION PAYMENTS (INCOMING) 161 225 242 279 312 EQUALIZATION PAYMENTS (OUTGOING) - - - - - Total Operating Revenues 1,134 1,354 1,508 1,682 1,914 Operating Expenses Energy Purchased 639 754 853 943 1,087 All Other Operating Expenses 455 521 572 630 700 Total Operating Expenses 1,094 1,275 1,425 1,573 1,787 Operating Income 40 79 83 109 127 Interest 22 30 35 39 38 Net Profit 18 49 48 70 89 Rate Base (Average Net Fixed Assets in Operation) 1,173 1,350 1,628 1,922 2,235 Rate of Return 3.4% 5.9% 5.1% 5.7% 5.7% Appendix 16 Page b of 10 pages After Revenue Adjustment Provincial Electricity Authority (PEA) Forecast Sources and Applications of Funds 1974-1978 Fiscal Year Ending September 30 1974 1975 1976 1977 1978 Total --- n Baht million ----------------- SOURCES Internal Operating Income 40 79 83 109 127 438 Depreciation 77 86 96 105 114 478 Internal Sources Gross 117 1 79 24 117 L.ess: Interest 22 30 35 39 38 164 Amortization 19 22 25 25 27 118 Internal Sources Net 76 113 119 150 176 634 External Customers' Deposits 15 16 16 17 17 81 Foreign Loans 21 145 186 172 180 704 TRANSFER OF GOV'T. FUNDS 74 103 89 101 106 473 TOTAL SCURCES 186 377 410 440 479 1,892 APPLICATIONS Construction Expenditures 166 352 385 405 439 1,747 Variations in Working Capital 20 25 25 35 40 145 TOTAL APPLICATIONS 186 377 410 440 479 1,892 Percentage of Investment Expenditures Financed by Net Internal Sources 46% 32% 31% 37% 40% Appendix 16 Page 5 of 10 pages Provincial Electricity Authority (PEA) Notes on Financial Statements The financial statements are based on data obtained from PEA. They take into account the expected power demand increase and have been reconciled with the power supply figures from EGAT. The statements have been drawn up in t-xo versions: (i) before tariff adjustment; and (ii) after tariff adjustment. In both versions the expenses have been forecast assuming all expected increases (including a 60% fuel increase in FY 1974 and an additional 40% in FY 1975); the average revenues, however, have been kept at today's levels in version (i), but have been adjusted as required in version (ii). Long-Term Borrowings as of September 30, 1972 Lending Organization Loan Amount Term ,A. F 3-1/2% interest, 25 Krmditanstalt fuer DM 44 million years with 5 years of Wiederaufbau grace OECF Y 822.3 million h-1/2% interest, 25 years with 5 years of grace B. Local Ministry of Finance Baht 106 million 3-5% interest, 25 years with 5 years of grace Appendix 16 Page 6 of 10 pages Provincial Electricity Authority (PEA) Summary of the PEA-Act 1960 Ministry in Charge: Ministry of the Interior Duties and Powers: 1. Generation, supply and sale of electric energy; and 2. darrying out the businesses related to the supply of electric energy. PEA carries out its activities in all areas other than the supply areas of MEA. After transfer of generation and transmission facilities to the Yanhee Authority (now EGAT), PEA does not generate electric energy in areas where such transfer has been made. Capital of MEA: 1. Government budgetary appropriations. 2. Initial net assets as transferred from the Provincial Electricity Organization. Supervision, Control and Management General Supervision: Minister of the Interior. Any matter which has to be submitted to the Council of Ministers has to be channelled through him. Board of Directors: 5-9 members) appointed by the Council of Ministers The Board appoints the general manager who is ex-officio member. This appointment and removal has to be approved by the Council of Ministers. The Council of Ministers' approval has to be sought before: 1. increasing or reducing the capital; 2. borrowing in excess of Baht 3 million; and 3. disposing of immovable property or writing off property valued in excess of Baht 100,000. Appendix 16 Page 7 of 1C pages Budget: The annual investment budget has to be submitted to the Council of Ministers for approval. It has to be accompanied by the operational budget for information. Remittance to Government: The annual surplus remaining after deduction of all expenses and after financing a substantial portion of its investment has to be transferred to the government. Should revenues be insufficient to cover expenses, the government has to cover the deficit. Appendix 16 Page 8 of 10 pages Provincial Electricity Authority (PEA) TailIfs In. Aras of In Areas of Self- 1. General Service Purchased Energy Generated .Energy 0 - 2 kwh per month Baht 4.00 Baht 4.00 3 - 50 " " " " 1.10/kwh l.40/kwh 51 - 150 ,, t,,tt 1.04/ "i 1.35/ 151 - 300 " " i o 0.94/ " 1.25/ 301 - 550 it " o.84/ II II 1.15/ " 551 - 930 "I It 0.74/ " 1.05/ 931 and above " " 0.60/ " I 0.90/ It 2. Small Business 0 - 100 kwh per month Baht 85.00 Baht 115.00 101 - 1,000 It " "i 0.70/kwh I 0.85/kwh 1,001 - 3,000 1?, It 11 rt 0.62/ " " 0.80/ "i 3,001 - 9,000 ' It " " 0.59/ o I o.65/ " 9,000 -19,000 " " o.55/ , , o.60/ " 19,000 and above " " 0.50/ " " 0.55/ " 3.. General Business (i) Demand Charge: First 200 kw Baht 39.00/kw Baht 50.00/kw Over 200 kw " 35.00/kw it 40.00/kwn (ii) Energy Charge: First 50 kwh per kw of demand Baht 0.39/kwh Baht 0.45/kwh Next 150 kwh per kw of demand " 0.36/ it o .42/ It Next 200 kwh per kw of demand Xl 0.30/ It t 0.34/ II Over 200 kwh per kw of demand " 0.22/ ' " 0.25/ 1 4. Medium Business (i) Demand Charge: Baht 35.00 /kw (ii) Energy Charge: First 50 kwh of kw of demand " 0.37/kwh Next 150 kwh of kw of demand " 0.34/ 'l Next 200 kwh of kw of demand " 0.29/ 1 Over 200 kwh of kw of demand " 0.22/ " Appendix 16 Page 9 of 10 pages In Areas of In Areas of Self- Purchased Energy Generated Energy 5. Industry (i) Demand Charge: First 2,000 kw Baht 35.00/kw Over 2,000 kw " 32.00/kw (ii) Energy Charge: First 50 kwh of kw of demand Baht 0.34/kwh Next 150 "" " " ' 0.31/ " 200 "I " " 0.28/" Over 200 " " " " " " 0.21/ " 6. Water Works Baht 0.50/kwh Baht 0.50/kwh 7. Mining Industry " 0.40/kwh " 0.50/ " (if consumption below 50,000 kwh per month tariff No. 2 applies) 8. Agricultural Pumping Baht 0.40/kwh Baht 0.40/kwh Appendix 16 Page 10 of 10 pages Provincial Electricity Authority (PEA) Accelerated Rural Electrification In the context of the "Accelerated Raral Development" plan (ARD) PEA is charged with the accelerated rural electrification project. Out of approximately 45,000 villages in 68 provinces within the PEA service area, roughly 4,500 (10%) had electricity supply by mid-1972. Experience shows that about 500 new hamlets and villages are being formed every year; this is approximately the same rate as the level of village electrification so far. Consequently it was recognized that the pace of rural electrification has to be accelerated considerably to keep up with the steadily increasing demand. Following the government's approval of the accelerated rural electrification development which was given in principle in 1971 and repeated in 1973, PEA, together with the Rural Electrification Coordinating Committee and with the assistance of USOM developed a 25-year long-range program,for the total electrification of Thailand. This program was subdivided into 5 five-year programs. The first five-year program to be started in 1975 envisages the electrification of 3,600 villages (about 150,000 new customers) with a population of about 1 million. The investments are included in the financial projections. In discussion PEA expressed doubt that it will be possible to carry out the program as envisaged due to lack of funds. PEA's tariffs are too low to provide sufficient earnings for a reasonable internal cash contribution and the contribution on the part of the government in the past were too low to even ensure a normal expansion program. Securing adequate funds for the local as well as the foreign component of the required investments is therefore essential for carrying out the project. Appendix 17 Page 1 of 2 pages Power Sector of Thailand Re-Arrangement of Revenues 1974 1975 1976 1977 1978 -in Baht million- I. TOTAL POWER SECTOR Rate Base (Average Net Fixed Assets in operation) 12,320 14,190 15,558 17,060 18,934 A. Before Revenue Adjustment Operating Income 622 552 609 703 778 Rate of Return 5.0% 3.9% 3.9% 4.1% 4.1% Total Investment Expenditures 2,419 3,794 4,139 3,810 3,531 Total Internal Sources (Net) 446 313 306 370 266 Percentage of Investment Expenditures Financed by Net Internal Sources 18% 8% 7% 9% 8% B. After Revenue Adjustment Operating Income 1,232 1,419 1,556 1,706 1,893 Rate of Return 10% 10% 10% 10% 10% Total Investment Expenditures 2,419 3,794 4,139 3,810 3,531 Total Internal Sources (Net) 1,122 1,221 1,300 1,426 1,412 Percentage of Investment Expenditures Financed by Net Internal Sources 46% 32% 31% 37% 40% Appendix 17 Page 2 of 2 pages 1974 1975 1976 1977 1978 -- in Baht million ------= II. CALCULATION OF BQUALIZATION PAYMENTS (Assuming MEA and PEA apply the same tariff level) Rate Base NEA plus PEA 3,583 4,151 4,846 5,531 6,210 (i) Operating Expenses MEA plus PEA including Energy Purchases from EGAT 3,301 3,956 4,434 4,892 5,483 (ii) 10% Rate of Return on MEA plus PEA Rate Base 358 415 485 553 621 (iii) Total Revenues Required for 10% Rate of Return on MEA plus PEA Rate Base 3,659 4,371 4,919 5,445 6,104 (iv) Other Revenues (MEA plus PEA) (88) (94) (95) (95) (96) (v) Revenues from Sales of Power (MIA plus PEA) 3,571 4,277 4,824 5,350 6,008 (vi) Sales of Energy (Gwh-MEA plus PEA) 6,543 7,565 8,609 9,630 10,806 (vii) Average Revenues per kwh Sold for MEA and PEA 54.6 56.5 56.0 55.6 55.6